Assalamualaikum Warahmatullah , Salam 1 MALAYSIA
In the name of Allah most gracious and most merciful
Power for Allah
Might for Allah
All blesses to Allah
We are here because of Allah
First of All, i would like to congratulate to all my classmates and Junior because of yours excellent academic performance for the previous semester. Way to go brothers and sisters, keep it up till the last moment yeah
and of course, to all my new comers, freshie semester one, warmth welcome to all of you
UniSZA is the best place to you to create yourself to somebody. "we are not born to be somebody, but we create ourselves to be somebody", as a adage goes.
My respectful brothers and sisters, finance is one of the best courses which is offered by our beloved University. Besides, the demand for this course in market is very high.
So, we are the luckiest one to be finance students. :-)
for this posting, i would like to share some of my knowledge about foundation of finance. This subject was my first finance subject in semester 3. All praises due to Allah because most of finance students scored A in this challenging subject . Thanks for the blessing
at the beginning of this subject, all you need to know are as follows
- distinguish the goal of the firm
- The five basic principles of finance and business
- Identify the type forms of business
for the first learning objective.
I will make it as simple as i can to give you fully understanding about the goal of the firm
Needless to say, most of students find difficult to identify the goal of the firm due to different perspective and point of view
but it doesn't matter here, we are neither professional nor scholar
We are learner, so we have to know what we need to know.
ok. To make it simple, you have to know this two goals of firm
1. Microeconomics perspective: To maximize the profit
2. Finance Perspective : To maximize of shareholders wealth (masuk exam taw yg ni, so fhm btl2 taw)
The goal of financial manager is to create wealth for the shareholders,( Foundation of finance, 7th edition, keown)
Shareholders, who are they?
Simple one, Shareholders are the legal owners of the company
understand???:-)
Five principles that create the foundation of Finance
5 Axioms
These Five principles are very important to be mastered by us as finance students
Ok!! For the first principle is
Principle 1 : CASH FLOW IS WHAT MATTERS
This is very simple principle but difficult to understand (HAH cm ne 2)ahahha
cash basis VS accrual basis
In a simple word
Cash basis: financial manager
Accrual basis: Accountant (budak2 account la ni)hehehe
We have to know that profits can differ dramatically from cash flow
Cash Flow VS Income statement
they are totally different ok
Principle 2 : MONEY HAS A TIME VALUE
it's very simple
To understand this principle, all you need to do is understand this sentences
A dollar received today is more valuable than a dollar received one or two year from now (Foundation of finance, 7th edition, keown)
Sebabnya, duit yang kita terima hari ni, kita boleh buat pelaburan (investment) dan perolehi faedah(interest), usury haram taw dalam islam...ehehhheh..dun forget :-P
Principle 3: RISK REQUIRES A REWARD
Very simply, investors will not make any investment unless they expect to receive a return on their investment
Sama je la dgn kita, kita xkan bangun pg tanpa sebabkan..heheh...
Investors will want a reward or return that fulfill two requirements:
- A return for delaying consumption
Simple je, contohnya, kita ada RM1000, tapi kita dapat tahu kalau kita melabur kat syarikat A, kita punya RM1000 tadi akan berganda menjadi Rm2000 dlm satu tahun. then kita tangguh kan pengunaan RM1000 tu untuk dapatkan RM2000 dalam masa 1 tahun..tu la mksdnya..FAHAM???
2. An additional return for taking on risk
Kita xkan amik resiko klu kita tahu iainya tak mendatangkan sebarang hasil...The higher the risk, the greater the reward will be...
Principle 4 : MARKET PRICES ARE GENERALLY RIGHT
Firstly, we have to understand the concept of EFFICIENT MARKET
What is meant by efficient market: E.M is one where the prices of the assets traded in the market fully reflect all available information at any instant in time (Foundation of finance, 7th edition, keown)
Very simply, all decisions in the market will affect the prices of securities such as BONDS and STOCKS
e.g
Bad news = stocks price will be drop
Good news = stocks price will be increased
Principle 5: CONFLICTS OF INTEREST CAUSE AGENCY PROBLEMS
As we know, different people have different point of view
back to the foundation, the goal of the firm is to maximize the value of the firm's shares
However, managers do not always follow this ultimate goal due to the conflict which occurs in an organization
Sometimes manager will make a decision that can cause a decrease in the value of the firm's shares
What is best for the shareholders is not always best for the managers
Managers will avoid any projects that have risk involved with them
Cnthnya, projek B akan beri pulangan berlipat kali ganda kepada SHAREHOLDERS tapi dalam masa yang sama iainya sgt berisiko tinggi kepada MANAGERS..mungkin MANAGERS akan dipecat kalau projek ni x berjaya...jadi managers cuba elak untuk tidak menerima projek tersebut
Thus, Managers may take decisions that are not in line with the goal of maximing shareholders wealth..
Understand???
P/S: Any questions regarding this posting, you can contact me through FB or see me personally, i will help u as far as i can...God will help those who help themselves
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