Strategic Finance

Assignment # 1

Name:

Hafiz Muhammad Hafeez

CMS:

19452

Financial Statement Analysis

Financial statement analysis is the process of reviewing
company's financial statements to make better economic decisions.

and

analyzing

Capital Structure
This is how company manages the finances regarding the operations of the company. The
sources can be equity and debt.
Risk & Return
High risk is associated with higher returns. This is tradeoff between minimum possible risk
and highest possible return.
Capital Budgeting
This is the decision that the firms long term investment in shape of new plant and machinery
and R&D are worth funding through the firms capital structure.
Securities & portfolio Management
This is the art and science of making decisions about investment mix and policy, matching
investments to objectives, asset allocation for individuals and institutions, and balancing risk against
performance.
Dividends
Part of profit given to shareholders of the company.
Financial Evaluation
This is the evaluation of different options of available with the company for finances.
Time value of Money
This is the concept that the value of money today is more and will decrease with time.
Asset Management
This is the process of developing, maintaining, operating and disposing off assets cost effectively.
Working Capital
The capital of business used in day to day operations.
Cost of capital
This is the opportunity cost of capital. i.e. the rate of return that could have been earned by putting
the same money in a different investment.

Importance of companys financial statement and financial reports.

A companys financial statements provide various financial information that investors and
creditors use to evaluate a companys financial performance. Financial statements are also
important to a companys managers because by publishing financial statements,
management can communicate with interested outside parties about its accomplishment
running the company. Different financial statements focus on different areas of financial
performances.
Financial conditions shown in the balance sheet are snapshots of a companys assets,
liabilities and equity at the end of a financial reporting period; they dont reveal what
happened during the period from operations that may have caused changes to financial
conditions. Therefore, operating results during the period also concerns investors. The
financial statement of income statement reports operating results such as sales, expenses
and profits or losses. Using the income statement, investors can both evaluate a companys
past income performance and assess the uncertainty of future cash flows.

Questions regarding the topic

What is the impact of time value of money on capital structure?
How company decide the amount of dividend to be given?
How we calculate the uncertainty in future cash flows?
How does having more or less retained earning effect the shareholders and investors?