Financial Management Theory and Practice
In this document, the rating for the three concepts that I have learned in the course is discussed. I would like to rate 1 to the financial statement analysis, 2 to risk and returns and 3 is the cost of capital.
My rationale to explain the rating 1 to the financial statement analysis is because it is the main source of the financial and nonfinancial information of the business. It briefs about the related factors, policies and other external factors that affect the financials. The financial figures on its own cannot explain much about the changes. Therefore, the readiness and understanding for the financial statement is the utmost important aspect that needs to be well understood (Coe, 2011).
I have rated risk and returns as second because the fundamental aspect necessary to understand for a financial manager the actual condition of the business. Understanding risk and return would enable to understand the investment, and the possible returns that could be attained through measuring statistical figures and risks would enable to predict the potential risks that could be incurred, and the policies or necessary decisions could be made to mitigate these risks for certain returns.
I have rated cost of capital as the third; I believe that the cost of capital is only important to understand when the business is announcing the new project and the future possible outcome on the cash flows of the business. These are projections that could vary with the conditions. Therefore, the concept of cost of capital I believe is only significant to understand when the new investments would be made (Coe, 2011).
References
Coe, C. K. (2011). Nonprofit Financial Management: A Practical Guide. New York: John Wiley and Sons.
