Financial Management Notes

Financial Management Notes - FinancialManagement 14:42

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Financial Management 14:42 Daily Functions and Occasional Functions Daily Functions  – credit management, cash management  Occasional Functions  – issuing stock, paying dividends (4 times a year) Determine the trade off between profitability and risk to maximize stockholder  wealth. Goal of Financial Management :  maximize stockholder wealth Stock Value = Price Earnings Ratio x Earnings Per Share Average PE (Price Earning Ratio) is 16 CHAPTER 3 A) Profitability Ratios                Saxton                         Industry   1   net income/sales            $200k/4.0M =5%              6.7% 2a  net income/total assets        $200k/1.6M =12.5%       10% 2b   net income/sales x sales/total assets     12.5%=5%X= 2.5%     10%=6.7%  x 1.5 3a  net income/stockholders equity    200k/1.0M =  20%       15% 3b  (NI/Total Assets)/(1-Debt/Total Assets)
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Financial Management Notes - FinancialManagement 14:42

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