Introduction to Financial Management and Financial Markets

Introduction to Financial Management and Financial Markets

Assignment Overview

This assignment will cover both the role of the financial manager as well as the introductory material on stock market investing. Make sure to fully review all of the required reading material before you begin this assignment. Note that all of the questions are conceptual in nature and will not require any computations. But make sure to thoroughly explain your reasoning behind each answer, and to support your answer using references to the required background readings.

Case Assignment

Please download the Case 1 Template. You will type your answers into this document. Save the document with your last name and submit to the dropbox.

Question 1: In your small business you have a finance department with a CFO, controller, and treasurer. For the following scenarios, explain which of these three financial executives would be the most likely to work on the issue based on the descriptions of the roles of the CFO, controller, and treasurer from Brealey, Myers, & Marcus (2009) from the required reading.

A. You suspect that a lower-level employee has embezzled about $50,000 over the last three years. You want to try to find out who based on past financial records. Who would be most likely person to look into this issue—the CFO, the treasurer, or the controller? Why?

B. Your chief marketing officer wants to take out a large loan to finance a major advertising campaign that he claims will bring in large sums of new profits over the next few years. However, your chief operating officer wants to take out a large loan to purchase some new equipment and machinery that she claims will save your company a lot of money over the next few years. You would like to see some estimates about which of the two projects will be most likely to increase profits enough to be able to pay back the loan. Who would be most likely person to look into this issue—the CFO, the treasurer, or the controller? Why?

Question 2: Explain whether the following assets are a real asset or a financial asset. Explain your reasoning using the definitions of real vs. financial assets in Brealey, et al., (2009) from the required reading.

A. A certificate of deposit at your local bank

B. A two-bedroom house

C. $50,000 worth of bonds from an airline company

D. Ownership of a copyright to a hit song

Question 3: Complete financial research on Facebook and General Motors using a webpage such as investing.com, finance.yahoo.com, or Bloomberg.com. Based on their stock’s P/E ratios, dividend yields, and other information, compare and contrast these two stocks. How would you classify these stocks: growth stock, value stock, or income stock? Explain your reasoning using concepts from the background readings as well as any information you find on these two companies. Your answer should be about 100–150 words and can include graphs or diagrams.

Assignment Expectations

Answer the assignment questions directly.

Stay focused on the precise assignment questions. Do not go off on tangents or devote a lot of space to summarizing general background materials.

For computational problems, make sure to show your work and explain your steps.

For short answer/short essay questions, make sure to reference your sources of information with both a bibliography and in-text citations. See the Student Guide to Writing a High-Quality Academic Paper, including pages 11-14 on in-text citations.

 

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