Finance

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MASTERS IN BUSINESS ADMINISTRATION MAY/2015 BMMF5103 MANAGERIAL FINANCE Q1: The role of a financial manager requires both an understanding of how the business functions as a whole and specialized financial knowledge. The head of the financial operations is called the chief financial officer (CFO). Financial managers develop strategies that will implement the long-term goals of a corporation. Their main goal is to maximize the value of stock shares. Stockholder wealth maximization is the appropriate goal for management decisions. The risk and timing associated with expected earnings per share and cash flows are considered in order to maximize the price of the firm’s common stock. Maximizing shareholder wealth…show more content…
This is bad for investors because the entire point of a risk premium is to achieve a higher rate of return on investments by accepting more risk. For most assets the risk premium will be positive before an investment is undertaken since investors will demand compensation over and above the risk-free return to invest money in risky assets. But after an investment is undertaken, the observed risk premium can be negative if the asset’s nominal return is unexpectedly low, the risk-free return is unexpectedly high, or if some combination of these two events occurs. So, yes the risk premium can be negative after an investment is undertaken because this will promise expected or reasonable returns to the investors. Q4: A number of publicly traded firms pay no dividends yet investors are willing to buy shares in these firms. Good examples of this kind of shares are Berkshire Hathaway and Google. The reasons for this are because these companies have the following advantages which are beneficial to the investors in terms of: 1) Good fundamentals These are big established conglomerates which are well known worldwide on their excellent operational performance such as efficiencies in management and Human Resource. Their outstanding financial structures and investments stabilities and investment performance are also big attractions to the investors which they believe could bring maximum returns on

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