Free «Finance» Essay Sample

The world would not be able to survive and develop without organizations that constantly ‘fuel’ the world economy with new working places, money and progress. The financial area is the one that is helping the organizations to monitor their funds and taxes. Thereafter, the objective of the following paper is to review certain financial indicators, statements and ratios.

Four basic financial statements include a balance sheet, an income statement, a statement of retained earnings and a statement of cash flows. The main objective of the balance sheet is the financial position reporting of the organization at a certain period. Income statement is about reporting the revenues that are lower than the expenses of a certain time (accounting period). The third component is to present the dividends distribution and the net income that affected the company’s financial position. The statement of cash flows reports cash outflows and inflows in the categories of financing, investing and operating during accounting period.

The four basic financial statements include financial ratios that are presented in the form of numbers. They indicate the performance of the organization, which is seen once ratios are compared with previous years, other industries, cmpanies and overall numbers of economy. Ration show the individual values and their relationships, and display what was the performance in the past and what it is likely to perform in the future (Investopedia Staff, 2014).

Time of Value Money is the calculation that is used to solve the financial problem for one of several variables. In a basic level, this measure shows that taking money now is more beneficial than taking the same amount over a period of time. The major types include future value of a lump sum (amount of money that business will have if to put one deposit without withdrawals); future value of annuity (amount of money that business will have if make equal deposits over certain period of time); present value of a lump sum (shows how much money should be paid for a current investment with a given interest rate so it would generate in the future lump sum cash flow); present value pf annuity (shows how much money should be paid for a current investment in order to get back a stream of consecutive and equal payments in the future with a given interest rate) (Peavler, 2014).

Another important financial term is ‘Yield To Maturity (YTM)’, which is a yield from a long-term bond that is shown as an annual rate. The calculation of this figure is about current market pricee of the bond, time to maturity, interest coupon rate and par value. It helps to calculate what return would be out of bond if investors compare different coupons and maturities (Investopedia, 2014).

Investment bankers and venture capitalists play an important role in the financial services, as those professionals have several important functions and missions to accomplish. Venture capitalists are the one that make investments in the businesses as soon as it starts to operate. The level of risk is extremely high, but this provides a business with an opportunity for further operations and profit growth. Investment bankers are there to help other businesses to gather money from other investors. They are able to finance transactions for organizations and use financial markets, including equity and debt for that (Terzo, 2014).

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Two components must be assessed during the pricing or investment process, which are return and risk. The likelihood of future values is the risk, while amount and timing of future values is a return. Risk decreases the future return’s value. Risk is a part of any investment that is expected to have a return. No or very little return comes out of a riskless venture. The investor must make a realistic assessment of his or her capacity to take risk (Loth, 2014).

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