Market prices, Valuation Principle, Net present Value, interest rates, and bonds - Essay Example

Through the market price, the financial managers can easily know the current price of the products and services of the company and also can estimate the future price of the products and services. The managers can also be aware of the price of the raw materials and other necessary things that are required for the smooth functioning of the business. Another essential thing that is important and can be known through the current market price is the requirement of working capital of a business. Moreover, through these the future working capital requirement can also be met.

Understanding the current price of the debentures and shares is also of high value for the finance manager. The price of the share and debenture are of great importance to the financial manager because through these prices the total share capital and the value of the business can be calculated. Furthermore, on the basis of these values and financial structure, the firm can expect higher investment from the public. Hence, on the basis of the above analysis it can be said that the market price is highly useful to the financial manager (Investopedia, n.d.) Question 2: Discuss How the Valuation Principle Helps a Financial Manager Make Decisions Valuation is the method of judging the potential market value of the assets and liabilities of a firm.

Valuation is essential and is required in the business for the future prospects. The work of valuation generally arises from mergers, acquisition, valuation of assets and liabilities. The valuation principle is of great importance to the finance manager in order to make the decisions regarding the future possibilities of the firm. Risk is associated with every aspects of the business. Through different valuation techniques, the finance manager can estimate the future risk associated with the business or any other projects.

After considering the level of risk the finance manager can estimate the profits associated with the businesses and projects. The valuation principle helps the finance manager to estimate the outlook of the assets and liabilities of the business and can also make an assessment for the future requirements by the business house. Tax assessment is one of the important aspects of the business for the finance manager. Hence, with the various tools of the valuation principles, the finance manager can easily estimate the tax structure of the future.

For assessing the financial feasibility and viability of the future, the principles of valuation play a significant role in the job profile of the finance manager. Moreover, in case of mergers and acquisitions, the valuation principles are needed for the business with the available in-depth financial information of the company. Hence, it can be concluded that the valuation principles are of high importance to the financial manager in order to make decisions (Blackburn, 2001). Question 3: Describe How the Net Present Value Is Related To Cost-Benefit Analysis The distinction between the present value of cash inflows and cash outflows is known as the Net Present V