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Explain how you will apply in real life the following AXIOMS of FINANCIAL MANAGEMENT AXIOM 1: RISK-RETURN TRADE OFF AXIOM 2: TIME VALUE OF MONEY AXIOM 3: CASH NOT PROFIT IS KING

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter10: Auditing Cash, Marketable Securities, And Complex Financial Instruments

Section: Chapter Questions

Problem 40CYBK

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Concept explainers

Functions of Financial Institutions

Financial institutions are businesses that are formed to deal with financial and monetary transactions. These organizations primarily accept deposits, advance loans, make investments, and provide foreign exchange services. Financial institutions include, but are not limited to, banks, insurance companies, trust companies, brokerage firms, and investment bankers. Because financial institutions play such an important role in the economy in terms of monetary transactions, regulating their activities has become a requirement for governmental authorities. As a result, the government creates a multitude of laws and regulations to oversee the activities of financial institutions.

Question

Explain how you will apply in real life the following AXIOMS of FINANCIAL
MANAGEMENT
AXIOM 1: RISK-RETURN TRADE OFF
AXIOM 2: TIME VALUE OF MONEY
AXIOM 3: CASH NOT PROFIT IS KING
AXIOM 4: INCREMENTAL CASH FLOWS
AXIOM 5: EFFICIENT CAPITAL MARKETS
AXIOM 6: THE CURSE OF COMPETITIVE MARKETS
AXIOM 7: AGENCY PROBLEM
AXIOM 8: TAXES BIAS BUSINESS DECISIONS
AXIOM 9: ALL RISK IS NOT EQUAL
AXIOM 10: ETHICAL BEHAVIOR IS DOING THE RIGHT THING AND ETHICAL
DILEMMAS ARE EVERYWHERE IS FINANCE.

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