FINAL PROJECT

SUBMITTED TO SIR NAUMAN

SUBMITTED BY IQRA BURHAN

UMME HANI

IQRA ANWAR

ANUM NASEER
CHIEF FINANMCIAL
OFFICER

CAPITAL
MARKET
AND
FUNDING

FINANCIAL PROFITABILI
PLANNING TY AND
AND CASH CASH
CFO

CONTROL
SYSTEM AND
AND
REPORTING
COMPLIANCE
 INTER VIEW QUESTIONS FROM CFO
QUESTION ARISE FROM CHAPTER NO 1
Q In your view what is financial management?
A financial management system is the methodology and
software that an organization uses to oversee and
govern its income, expenses, cash flow, payments and
fixed deposit and assets with the objectives of
maximizing profits.

Q In your view what would be the ultimate business goal?

Ultimate business goal is earn maximum profit and

keep internal control in organization.

Q How much is cash flow important in your decision making?

Cash is also important because it later becomes
payment for things that make your business run,
positive cash flow is preferred. Positive cash flow
means your business is running smoothly. So it’s so
important for business.

Q How do you tackle the agency problem?

We have no agents so there is no agency problem in

our business.
 QUESTION ARISE FROM CHAPTER NO 2
Q On what ground you take a decision in terms of financing of assets
or in terms of lending on assets?

We only deal in leasing cases and no use

any financing term.

Q What your view regarding effective annual interest rate in terms

of financing?

The effective annual interest rate is a way

of restating the annual interest rate so
that it takes into account the effects of
compounding. Currently there is no
security just fixed depositing.
 QUESTION ARISE FROM CHAPTER NO 3
Q How you make decision when you need to buy any long term
security?
We have seen the company
valuation. We concerned about
tax and focused on future.

Q In your view what are the points should be kept in mind in the
valuation of stock?

 Market price
 Dividend
 Company future

QUESTION ARISE FROM CHAPTER NO 4

Q Do you have any idea regarding CAPM model?

NO ANSWER

Q Is systematic risk existing in market?

Yes existing but in our business

there is no systematic risk.
 QUESTION ARISE FROM CHAPTER NO 5
Q How do you reduce the operating and cash conversion cycle?

Manage project if we done payment in 30

days we pay supplier within 45 days. The
CFO has to be plugged into what’s going on
in operations as well as finance in order to
identify areas of improvement. And improve
cash flows.

Q In your view which is a best instigator of profitability ROA, ROE,

ROI?

In our business ROI is best because we don’t

done manufacturing business.

Q What you suggest us as a financial manager that what are a points

we need to focus in order to become a competent and
professional expert?

As a financial manager I suggest you that experience is a

best toll for professional expert
 CHAPTERS SUMMARY

Risk and Return

Income received on an investment plus any change in market price,

usually expressed as a percent of the beginning market price of the
investment.

The variability of returns from those that are expected.

Certainty equivalent > Expected value Risk Preference

Certainty equivalent = Expected value Risk Indifference

Certainty equivalent < Expected value Risk Aversion

CAPM is a model that describes the relationship between risk and

expected (required) return.

BITA: An index of systematic risk. It measures the sensitivity of a stock’s

returns to changes in returns on the market portfolio

WE LEARN
We learn from this chapter that risk is exist everywhere and in business
also we can judge the nature of risk and mitigate it after knowing its
attitude CAPM and BITA also play a vital role in risk and return.
 DIVIDEND POLICY

Empirical Testing of Dividend Policy

Dividends are taxed more heavily (in PV terms) than capital gains.
Expect that increases (decreases) in dividends lead to positive
(negative) excess stock returns.

Stability -- maintaining the position of the firm’s dividend payments in

relation to a trend line

VALUATION OF DIVIDEND POLICY

 Information content
 Current income desires
 Institutional considerations

Stock Dividend: A payment of additional shares of stock to

shareholders. Often used in place of or in addition to a cash dividend.

Stock Split: An increase in the number of shares outstanding by

reducing the par value of the stock.

Stock Repurchase -- The repurchase (buyback) of stock by the issuing

firm, either in the open (secondary) market or by self-tender offer.

WE LEARN
We learn from this chapter that dividend is a tool that will maximize
shareholders wealth. Company can give dividend in shape of cash and
in shape of stock or in any situation we can repurchase our stock from
open market and by self-tender notice.

TIMES VALUE OF
MONEY

TIME allows you the opportunity to postpone consumption and earn

INTEREST

Future Value - Amount to which an investment will grow after earning

interest.

Compound Interest - Interest earned on interest.

Simple Interest - Interest earned only on the original investment.

We will use the “Rule-of-72”. For double the amount. 72 / i%

Annuity: a sequence of equal cash flows, occurring at the end of each

period. This is known as an ordinary annuity.

TYPES OF ANNUITY:

 Ordinary annuity (each payment made at the end of each

payment period)
 Annuity due (each annuity is made at the beginning of each
payment period)
 Perpetuity (payment made at the end continuous for indefinite
period)
WE LEARN

We learn from this chapter that if today we lend or invest or borrow

money different types of interest applied on it simple interest apply on
original amount compound interest means addition in previous interest
and annuity also apply and easy tool for installment basis dealings.

The Valuation of
Long-Term
Securities
Liquidation value represents the amount of money that could be
realized if an asset or group of assets is sold separately from its
operating organization. Going-concern value represents the amount a
firm could be sold for as a continuing operating business.

 A bond is a long-term debt instrument issued by a corporation or

government.
 A perpetual bond is a bond that never matures. It has an infinite
life.
 A non-zero coupon-paying bond is a coupon paying bond with a
finite life.
 A zero coupon bond is a bond that pays no interest but sells at a
deep discount from its face value.
 Preferred Stock is a type of stock that promises a (usually) fixed
dividend, but at the discretion of the board of directors.
 Common stock represents a residual ownership position in the
corporation.

WE LEARN
We learn from this chapter that for buying long term security evaluate
the market price check the valuation of company know the nature of
bond and bond price and bond can issue for long time period for
acquiring loan.
Corporate Finance
Corporate finance is the area of finance dealing with the sources of
funding and the capital structure of corporations and the actions that
managers take to increase the value of the firm to the shareholders, as
well as the tools and analysis used to allocate financial resources.

Financial Management

“It is the branch of finance which deals with the financial decision
affairs of the business firms”. It concerns with the acquisition of assets,
financing of assets, management of assets to achieve goal of a firm.

3A`s of Finance

• Anticipating financial management Acquiring Financial resources

• Allocating funds in business firms

Functions of financial Managers

 Acquisition Financing Management

Financial Markets

All institution and procedures for bringing buyers and sellers together
to fulfill their financial needs through financial instruments”.

WE LEARN
In this chapter we learn that financial management and corporate
finance play a vital role in finance field. It concerns with the acquisition
of assets, financing of assets, management of assets to achieve goal of
a firm.
Accounts Receivable and
Inventory Management

Credit Standards -- The minimum quality of credit worthiness of a

credit applicant that is acceptable to the firm.

Credit-scoring System -- A system used to decide whether to grant

credit by assigning numerical scores to various characteristics related to
creditworthiness.

Just-in-Time -- An approach to inventory management and control in

which inventories are acquired and inserted in production at the exact
times they are needed.

Economic Order Quantity

The quantity of an inventory item to order so that total inventory costs

are minimized over the firm’s planning period.

Issues to consider:

Lead Time -- The length of time between the placement of an order for
an inventory item and when the item is received in inventory.

Order Point -- The quantity to which inventory must fall in order to

signal that an order must be placed to replenish an item

WE LEARN
We learn from this chapter that using EOQ we can manage our deals
take order on time and deliver inventory on their place, just in time
approach helps the inventory management team.