BA 3301 Lecture Notes - Lecture 32: Prospect Theory, Utility, Daniel Kahneman
Document Summary
Financial management: planning for a firm"s money needs and managing the allocation and spending of funds. Risk / return trade-off: the balance of potential risks against potential rewards. Assets are future economic benefits controlled by the entity as a result of past transactions or other past events. Return is the gain or loss on an investment. Risk is the probability or likelihood or occurrence of losses on an investment. Time value of money argues that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. Financing is acquiring funds from external sources, including debt financing and equity financing. Leverage is the technique of increasing the rate of return on an investment by financing it with borrowed funds. Capital structure is a firm"s mix of debt and equity financing. Financial management refers to the management of a firm"s resources in order to achieve its objectives and maximise its value.
