Corporate Finance

Corporate Finance

Finance is defined as the management of large sums of money or as the financing of a business or other enterprise. Alternatively, a corporation's definition includes its legal status as a person but also means that it is a group of people or a company acting as a single entity. Additionally, an organization means two or more people working towards the same goal, much like a team. Interestingly, a team and a group exhibit the distinction that only a team works towards a shared goal. But the purpose of the present essay is to discuss corporate finance...

Thus, corporate finance centres on the financing or corporations, including how corporations raise the necessary capital to keep operating and growing, how managers maximize shareholders' value and how corporate resources are allocated. The particular field of finance also deals with corporate financial structure. A distinction is sometimes made between corporate finance and managerial finance, in that corporate finance focuses on financial management in corporations alone, whereas managerial finance includes all firms and businesses regardless of their size.

Hyatt Regency, Montreal, photo by Elena

Along these lines, corporate finance would be difficult to comprehend without understanding financial accounting and managerial accounting. Indeed, students of business, management and commerce more often than not have to complete introductory level courses for financial and managerial accounting. The main differences between the two subjects is that financial accounting is designed to elaborate on the financial aspects of the firm for external users (such as creditors, lenders, bankers and shareholders), while managerial accounting is designed for internal users (or employees and managers).

If one had to define accounting in one sentence, it would reflect the accounting equation, or Assets = Liabilities + Shareholders Equity. Obviously, the two sides of the equation must balance out for the firm to remain in the black and avoid falling in the red, common terms to describe a profitable company versus one that is crumbling under debt.

Party Time!

Party Time!

The entertainment industry rakes in several billions of USD per year for a reason – it is human nature to want to dissipate boredom. Often persons complain that they simply do not know what to do, or what to look for to get amused, as in the phenomenon of staring at Google search and simply lacking any idea as to which path to explore. Comedy is known to lift moods; the YouTube online community is great for that matter.

For example, Chick Comedy featured on YouTube is a virtually endless stream of short clips of female comics. For better-known women comedians there are the non-conservative Margaret Cho and Wanda Sykes. Interestingly, Margaret Cho has been previously romantically linked to Quentin Tarantino, while Wanda Sykes was deemed the 14th funniest person in the U.S. by Entertainment Weekly (McGruder, 2004). A note of caution, the styles and views expressed by these ladies could be judged as offensive. Among countries, Canada is the biggest Internet user, with approximately 85% of the population logging on to the World Wide Web on a regular basis (Pearson, 2009).

The social media, and most importantly the social networking websites, have transformed the way businesses operate and life in general.

Around 2010, there were even some advertisements on job search engines seeking to employ promoters as long as they had more than 2000 friends on a socializing utility. Increasingly, marketing firms are concentrating on social media to promote products, while the majority of large companies have corporate websites. Among the most popular hangout websites are Facebook, MySpace, Second Life, Bebo, Hi5, MyLife and Twitter. Some well-liked dating sites include Zoosk, PlentyOfFish, Mingles, Mingle2, Single & Mingle and Lavalife.

Most of the sites are in the free range, whereas famous matchmakers eHarmony, Match and True have fees attached. Business sites such as ZoomInfo and LinkedIn are designed specifically for professionals with career goals in mind. Facebook stresses the real life connections, while MySpace does much less so. Making new friends or pen pals can be best achieved with the help of sites such as NewFriends4U.

Other websites such as Craigslist are multipurpose: one can find a job, an apartment for rent, tickets to a gig, and even personal ads. MSN and instant messaging on gaming locations can also pass the time, distract or raise one’s spirits. A common complaint about online dating sites, from both men and women, is that many potential candidates just seem to want to e-mail ceaselessly and chat; other individuals are more serious about getting together.

The internet has no doubt brought people closer, but the anonymity it provides can also backfire, as in the cartoon where behind their respective computer screens, an obese balding woman with adult acne describes herself as a lingerie model to an out of shape very old man who tells her he is Madonna’s backup dancer. Probably as much, if not more, caution and common sense as in real life are strongly called for on the net.

Martinies  & Stilettos: Customarily welcome at a social gathering. Photo : Megan Jorgensen (Elena)

Cyber bullying has followed the Web expansion, with Megan Meier, a 13-year-old girl, committing suicide in 2006 over a rival’s mother cruel comments and doings. In another case in 2011, two teenagers are brought to justice for ridiculing a classmate through a fake profile. The net is far from always being the safest place to be.

On a more positive side, Facebook is the subject of a 2010 movie starring Justin Timberlake The Social Network and gaining in notoriety everyday. Failbook is a parody, a fun take on the original, featuring screenshots from Facebook of, sometimes, hilarious faux pas (usually protecting users’ privacy: photos and names kept unintelligible). Laughter has been said to be the best medicine, and enjoying good times with friends can serve as an antidote to many of life’s troubles. The psychological community defines loneliness as not the absence, but the dissatisfaction with social relationships, while social support has been consecutively linked to better psychological adjustment, cognitive functioning and even physical health. Making friends is a whole fascinating topic, but the basic tenet is that prospective companions must share interests. Such encounters are sometimes embedded in the structure of a resource, such as Friends Meet Up for (at least) Montreal, Quebec, Canada.

References:

McGruder, A. (2004). The best of the rest: We rank the 25 funniest people in America – Chris Rock may be our funniest comic, but he’s got some serious competition… Entertainment Weekly, 756.

Pearson, C. (2009). Grocery slotting fees deprive consumers and manufacturers of shelf-respect. Straight Goods, March 19.

Party time. Photo by Elena

Top 3 Ways to Overcome Writer's Block

Top 3 Ways to Overcome Writer’s Block

Ok, so it’s exam time and you finally sat down to write that dreadful English literature essay (not to single out English literature majors here, it’s just that that post is about creative writing and writing for such classes are likely to be far more creative than an essay focusing on molecular biology.

A computer graphics enhanced pigeon. Image: Megan Jorgensen (Elena)

Number 3.

Talk to a friend. Yes, this could be seen as yet another way to procrastinate even further on that long overdue term paper, but since plagiarizing isn’t an option unless you want to get yourself expelled from the school altogether, you will have to find a way to turn in that assignment. Thus, talking to friends and peers stimulates us cognitively and may spark your though processes just enough to get you started on that new page, and many say that’s all it takes – to get started.

What is art? Image: Megan Jorgensen (Elena)

Number 2.

Plagiarize. No, no, no! This is a bad attempt at a joke. Whatever you do, do not plagiarize, it will not only get you a bad grade on the assignment, it may lead you to fail the course and even to get expelled, yes expelled, as in kicked out forever, from the schools, college or university you are attending. For the sake of people’s academic careers out there, I repeat: Do no plagiarize! However, reading up on the subject and even using properly cited and referenced material may given you a head start and even an advantage on your analytical essay.

Creative flow. Infinity. Image: Megan Jorgensen (Elena)

Number 1.

Distract yourself. This particular step works better with math problems but it may come in handy with writer’s block as well. Sometimes, when you’ve been hard at work with the same math problem for hours, you’ve exhausted all your cognitive resources and the solution is nowhere nearer. In those critical times, it’s better to distract oneself, like go to the gym and exercise (which actually increases cognitive function and releases endorphins making you feel good). Once rested and replenished, you can take on the task with new vigour.

Where the Living Is Easy

Where the Living Is Easy

In the US everyday necessities cost less in the Midwest and the South

Residents of New York City pay twice as much for movie tickets as their counterparts in Sioux City Iowa. A visit to the doctor costs more in Los Angeles than Montgomery, Alabama. Prices for a range of items differ from city to city and state to state, sometime dramatically. As a rule, the cost of basic items – from food to housing to entertainment – tends to be higher in a large metropolis than om smaller cities or towns. The cost of living is cheaper in the South and Midwest than it is on either the East or West Coast.

Nationwide, there isn’t much of a difference in the cost of basic consumer items, largely because of national brands and efficient interstate transportation. Bet there are significant regional differences in the prices of some services, notably health care and child care. Together, goods and services account for  35 to 40 percent of annual family spending.

Where the living is easy. Credit photo: Elena

The biggest cost differentials are in housing and taxes, which account for the lion’s share of most family budgets. According to figures compiled by Runzheimer international, a management consulting firm that determines relocation for businesses, the annual cost of three- to four-bedroom house or apartment in Little Rock, Arkansas, for example, is a third the cost of a similarly sized place in Washington, D.C.

Where quarters are cramped and prices high: Any large metropolitan area is going to be more expensive than a small town, but some big cities are a lot more expensive than others.

Of course, everything is relative. Even the most expensive cities in the United States are bargains compared with many cities abroad. Runzheimer, in fact, touts the United States to its foreign clients as an attractive relocation destination because of its comparatively low living costs.

Here’s the good news: New York looks like a bargain compared to Hong Kong.

Capital Asset Pricing Model (CAPM)

Capital Asset Pricing Model (CAPM)

You’ll never know the days, the nights, the tears, the tears I’ve cried – Tina Turner

No finance students goes through graduate or even undergraduate school without learning about the Capital Asset Pricing Model (CAPM). The CAPM formula involves a risk free rate, beta of the security and expected market return. The model is used in assessing risk and compare it to expected return and thus in determining the best price for risky securities. The model rests on the basic assumption that investors must be compensated in terms of value of money as well as of the risk they undertake.

In other words, the CAPM model attempts to predict whether a investment should be made according to the risk that it involves. Risk is seen as an inherent part of investing. For example, some individuals are risk averse, while others are risk tolerant. Such different character traits correspond to diverse investor profiles, and are likely to result in very different portfolios. In general, the more risk is involved, the more growth and income, but as with any subject, it is better to refrain from simplistic conclusions.

We will stand tall – Adele. RBC Dominion Securities. Image: Elena

Typically, diversification is seen as a method of reducing risk (modern portfolio theory). However, usually diversification cannot eliminate risk completely. Thus, the next best thing is for investors to be compensated for the risk they take on by a corresponding rate of return. Therefore, CAPM is a model showing the rate of return that should justify the particular security. Notwithstanding, much of theory is debated. Financial theories are no different. Hence, the CAPM model remains likewise argued about in the literature.

Historically, the CAPM was developed and introduced by financial economist William Sharpe in his book Portfolio Theory and Capital Markets. According to the theoretical construct, there are two types of risk: systematic and unsystematic. The CAPM is designed to compute systematic risk.