# Project #75991 - Business Finance DQ Help

Please provide a 150 response for each question below.

Financial Management, Chapter 5

Time Value of Money

Time Value of Money is an important concept of finance. We use a lot of equations based off this concept. If you gave me \$10,000 today, and I paid you back \$10,000 in 2044...what would you think about that?

Basic Finance, Chapter 20

Operating Leverage

As the Chapter discusses, Operating Leverage can be a risky choice for a business. Generally, businesses do not have a significant amount of flexibility in deciding operating leverage. As the text points out, the airline industry is an example of an industry with a high degree of operating leverage. The payoff increase once breakeven is reached because your variable costs are a lower portion of your total costs. It is important to be proactive in deciding how to structure your costs (fixed v. variable). However, the type of business may already be beholden to high or low fixed costs. Then again, this is an opportunity to think creatively. American Airlines could move fixed costs to variable if they leased planes from another company for each route. This is just an example that doesn't example the full impact of such a decision. However, it is an example to demonstrate that you can find ways to change costs from fixed to variable. In the end, it is not a simple decision.

Class- What are the risks of high fixed costs?

Financial Management, Chapter 13

Breakeven Point

When a firm captures the same amount of revenue as total costs, this is referred to as Breakeven Point. Sheridan Titman, Arthur J. Keown, John D. Martin (2014) states, "The cash break-even point tells us the level of sales where we have covered our cash fixed costs (ignoring depreciation) and as a result our cash flow is zero. To calculate the cash breakeven point, we consider only those fixed costs that entail a cash payment by the firm (specifically, we exclude depreciation expense)..."

QCash Break-even = (Fixed Operating Expenses Other Than Depreciation per Year)

(Price per Unit (P)-Variable Cost per Unit (V))

Class- How does breakeven point/calculation help organizations make decisions?

Financial Management Chapter 17

Financial Planning

Financial planning is essential for almost every aspect of business. This financial tool allows management to address the unknown future, reduce financial risks, respond to difficulties in a cost-efficient way, and increasing shareholder returns. To effectively execute financial planning, firms generally divide their planning process into two components, short-term planning and long-term planning. Each of these components is vital to the estimation of a firm's financial needs and they both, whether short term or long term, benefit the company for two significant reasons. "First, the firm has a base plan that is consistent with the firm's long-term goals and strategy. Second, as former president Eisenhower pointed out so succinctly many years ago, it's the planning process as much as or more than the actual plan that helps the firm prepare for an uncertain future" (Titman, Keown, & Martin, 2014, pg. 552).

With any financial planning there will be disadvantages because of the unpredictable future. Can anyone name disadvantages of short- term or long- term planning? How can these disadvantages be diminished or prevented?

Cash is King Video

• What was the most relevant part of this video?
• How can you use this information in your career?
• Were there any parts you found difficult to understand?

 Subject Business Due By (Pacific Time) 07/10/2015 12:00 pm
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