Part I Prompt You have completed an internship in the finance division of a fast

Question

Part I Prompt

You have completed an internship in the finance division of a fast-growing information technology corporation. Your boss, the financial manager, is considering hiring you for a full-time job. He first wants to evaluate your financial knowledge and has provided you with a short examination. When composing your answers to this employment examination, ensure that they are cohesive and read like a short essay.

Your submission must address the following critical elements:

I. Analyze Roles and Responsibilities for Compliance

A. Examine the types of decisions financial managers make. How are these decisions related to the primary objective of financial managers?

B. Analyze the various ethical issues a financial manager could potentially face and how these could be handled.

C. Compare and contrast the different federal safeguards that are in place to reduce financial reporting abuse. Why are these considered appropriate safeguards?

II. Investment Options

A. If a private company is “going public,” what does this mean, and how would the company do this? What are the advantages of doing this? Do you see any disadvantages? If so, what are they?

B. How do the largest U.S. stock markets differ? Out of those choices, which would be the smartest private investment option, in your opinion? Why?

C. Compare the various investment products that are available and the types of institutions that sell them.

Explanation / Answer

(I) To Analyze Roles and Responsibilities for Compliance:

(A) The types of decisions financial managers make and how are these decisions related to the primary objective of financial managers:

Financial managers play a pivotal role in the success of companies. Financial management involves allocating the financial resources of a company in a way that maximizes its wealth and profitability. Financial management activities into three broad categories:

(i) Capital budgeting:

Capital budgeting involves decisions about what investments a business will make with its resources. For example, Financial Manager may help the president of his company figure out if a new business is worth the investment in financial terms.

(ii) Financing:

Financing involves decisions about what external resources should be brought into the business to be used for investment in profitable enterprises. Examples of outside resources include funds acquired from investors from the purchase of company stock and funds acquired from creditors through loans.

(iii) Dividend policy:

Dividend policy is the decisions about profits to be distributed to equity investors, such as shareholders. Financial manager may help determine if there is sufficient revenue to cover the company's expenses and anticipated investments and still provide for a dividend distribution.

Roles & responsibilities of Finance Manager:

Management:

Funds Management:

Budgeting:

Financial Analysis:

Ethical Issues that a Financial manager may face:

Uncharted Territory: A generation ago, both the tax code and the financial products and services available were simpler than they are today. For example, if someone wanted to buy stock, a stockbroker would place the trade. If someone needed permanent life coverage, a whole life policy was issued. But now, planners must decide if this traditional approach is better, or whether the client would be better off buying any number of the diverse modern products available. The modern maze means every financial planner faces an ethical dilemma when trying to do the right thing for a client.

Sales Vs. Advice: The boundaries between sales and advice in the financial industry are also becoming increasingly blurred as new platforms and methods of doing business continue to emerge. What this usually boils down to is getting clients to do the right thing for the right reason.

Federal safeguards for reducing financial reporting abuse:

“Financial reporting” may be defined as the process of recording, reporting, and interpreting, in terms of money, an entity’s financial transactions and events with economic consequences for the entity. Reporting in the federal government also deals with nonfinancial information about service efforts and accomplishments of the government, i.e., the inputs of resources used by the government, the outputs of goods and services provided by the government, the outcomes and impacts of governmental programs, and the relationships among these elements.

Responsible stewardship of public money is integral to governmental accountability, and federal financial reports supply information that links stewardship to accountability. According to FASAB, “Because a democratic government should be accountable for its integrity, performance, and stewardship, it follows that the government must provide information useful to assess that accountability.”3 Reliable financial information may facilitate informed decision making, government management, and policy implementation. In addition, federal financial reports may make it easier to monitor waste, fraud, and abuse in federal programs.

Meaning of Private company going public:

In order to expand and initiate more money into the business, a private company goes public. In public company, as the name suggests, all the common public can become the shareholder of the company by investing some amount in the shares of the company.

Although further expansion is a benefit to the company, there are both advantages and disadvantages that arise when a company goes public.

Advantages:

Disadvantages:

Types of Investments available in Market:

As Financial Manager, there are different options available in the Market for investing money and maximise wealth for the company. Some of the options are as follows:

1) Bonds: Grouped under the general category called fixed-income securities, the term bond is commonly used to refer to any securities that are founded on debt. When you purchase a bond, you are lending out your money to a company or government. In return, they agree to give you interest on your money and eventually pay you back the amount you lent out.

2) Stock: When you purchase stocks, or equities, you become a part owner of the business. This entitles you to vote at the shareholders' meeting and allows you to receive any profits that the company allocates to its owners. These profits are referred to as dividends. While bonds provide a steady stream of income, stocks are volatile.

3) Mutual Funds: A mutual fund is a collection of stocks and bonds. When you buy a mutual fund, you are pooling your money with a number of other investors, which enables you (as part of a group) to pay a professional manager to select specific securities for you. Mutual funds are all set up with a specific strategy in mind, and their distinct focus can be nearly anything: large stocks, small stocks, bonds from governments, bonds from companies, stocks and bonds, stocks in certain industries, stocks in certain countries, etc.,

Alternative Investments: Options, Futures, FOREX, Gold, Real Estate, Etc.,
So, you now know about the two basic securities: equity and debt, better known as stocks and bonds. While many (if not most) investments fall into one of these two categories, there are numerous alternative vehicles, which represent the most complicated types of securities and investing strategies.

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