Summary
Summary MAC3702 Summarised Study Notes
- Institution
- University Of South Africa (Unisa)
Latest exam pack summarized notes for exam preparation. for assistance. All the best on your exams!!
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
4 reviews
By: rabelani • 1 month ago
By: mabason061 • 1 year ago
By: lcjfreeman • 2 year ago
By: loretjenkinson • 2 year ago
Content preview
MAC3702NOTES
,STUDY UNIT 1 ADVANCED ANALYSIS OF INFORMATION
Financial management
Financial management as a discipline seeks to optimize the financial resources (of) and returns (to) the
entity, by optimizing two primary activities, namely –
Financing activities, by deciding which sources of funding (debt or equity) should be used by the
entity and what the optimal proportion is for the various sources used; and
Investing activities, by deciding which investments should be undertaken by the entity within the
limitations of available funds and the identified feasible (can it be done?) and viable (does it derive a
positive return?) investment projects.
Goal of an entity
The key goal of any entity is to create long-term sustainable value for its stakeholders.
In the private sector, this involves the objectives of optimizing long-term shareholder or owner returns
on a sustainable basis as well as the responsibility of minimizing or avoiding negative impacts on the
natural environment is well as society
In a non-profit or government entity, the key goal remains to create value for stakeholders by achieving
the objectives of economic, efficient and effective utilization of resources.
Shareholder wealth maximization theory: The purpose of business is to maximize shareholder
wealth by generating profit thus creating capital, this profit and capital being the property right of
shareholders or owners of the business.
Stakeholder theory: firms should identify their stakeholders, and perform a value analysis as part of
the process. The requirements of legitimate major stakeholders are taken into account in the strategic
choices that an entity makes, and therefore in the objective(s) that it pursues
Business model or value creation model of an entity
A business model describes the rationale of how an organization creates, delivers, and captures value,
in economic, social, cultural or other contexts. The process of business model construction is part of
business strategy.
Although value is created within an entity, the ability of any entity to create value is largely dependent
on the following factors –
© 2017 Together We Pass. All rights reserved.
, The external environment within which the entity operates;
The relationships with stakeholders, which includes, employees, partners, networks, suppliers,
customers;
The availability, affordability, quality and management of various resources, or ‘capitals’
The ‘capitals’ or resources that entities depend on to create value, and that the entity influences in the
process can be categorized as:
Financial capital – the pool of funds that is available to the entity through debt and equity sources.
Manufactured capital – buildings, equipment, infrastructure, plant and machinery and other tangible
assets.
Human capital – the competencies, capabilities and experience of the management and staff available
to the entity.
Intellectual capital – the knowledge based intangibles available to the entity that provide a competitive
advantage such as intellectual property (patents, copyrights, software, licences and rights),
organizational knowledge (systems, processes, procedures and protocols) and other accumulated
intangible investments and resources (brands, goodwill and technological advances).
Natural capital – the renewable and non-renewable environmental resources and processes that
provide goods and services that support the value creation of the entity. This would include inter alia air,
water, land, minerals, biodiversity and eco-system health.
Social and relationship capital – the relationships established within and between institutions,
communities, group of stakeholders and other networks which enhance individual and collective
wellbeing. This includes relationships with customers, suppliers and partners.
These are referred to as the ‘six capitals’
Stakeholders of an entity
Key stakeholder groups
Stakeholders can be grouped into the following main groups –
Shareholders or owners of the entity;
Lenders and suppliers of borrowings;
Employees, including directors, managers;
Government;
Society; and
The natural environment.
© 2017 Together We Pass. All rights reserved.
, Risk and return of investors
There is always a risk/return tradeoff in investing. ... Higher potential returns are associated with
investments of higher risk, as most investors expect to be compensated for taking on additional risk
By investing in the business, investors are subject to;
Business risk ; the possibility a company will have lower than anticipated profits or experience
a loss rather than taking a profit
Financial risk: the possibility that shareholders will lose money when they invest in a company
that has debt, if the company's cash flow proves inadequate to meet its financial obligations
Illustration
Mr A has made a profit of R100 000 on his R500 000 investment (i.e. a 20% return), which has been
paid out as a dividend. He now wants to expand and has approached a bank for a R500 000 loan,
which has been approved. The loan will cost Mr A 10%. His financial position and expected return will
now be as follows:
© 2017 Together We Pass. All rights reserved.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying this summary from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller iStudy. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy this summary for R50,00. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
75323 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy summaries for 14 years now