Management and Organizational Studies 3311A/B Chapter Notes - Chapter 1: Cash Cash, Corporate Finance, Cash Flow

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 3311A/B
• Professor: Jun Wang

Document Summary

Capital budgeting decision (question 1: asks the question, what long term investments should the firm engage in? , e. g. land, factory. Networking capital decision (question 3: ask the question, how much short term cash flow does a company need to pay its bills , difference between current assets and current liabilities. Identification of cash flows: reporting of sales versus the collection of cash, reporting of expenses versus the payment of expenses, timing of cash flows. Individuals prefer to receive cash flows earlier rather than later because one dollar received today is worth more than one dollar received next year since today"s dollar can be invested to earn interest: risk of cash flows. Investors prefer to receive cash flows earlier than later: amount and timing of future cash flows is not certain, future money is not guaranteed , high risk = high return. In this example, is the amount debtholder/shareholder is owed: combined payoff to debt and equity, e. g.