Finance Course Work - Essay Example

A company needs capital to run the normal proceedings of a business and in order to gain such capital; organisations tend to approach financial markets. Such financial markets not only help in generating the finance to run an organisation but it also helps in many other ways. A financial market is a place whereby sellers and buyers meet each other in order to trade financial securities and commodities. The transactions within these markets are usually carried out in such a way that they reflect the supply and demand (Kapoor et al, 2012).

Companies which usually trade within the markets tend to keep a record of their business and such record is usually kept within financial statements which are prepared by the financial managers. There are various financial statements but the most important one include: the statement of comprehensive income and expenditure (SOCIE), the statement of financial position (SFP), the statement of changes in equity and the cash flow statement (Kapoor et al, 2012). SOCIE gives an insight to the profit/loss which an entity may have obtained as a result of their operations within a given period of time.

The SFP gives the year end assets position of an entity while the Cash flow statement provides a summary of the cash that has rotated in order to carry out the business operations (Madura, 2011). Companies tend to plan their operations in advance and also keep a record of that in order to keep a budgeted record, any deviation within the budgeted and the actual result is scrutinised if it is huge and the aberration is properly addressed to avoid the discrepancy in the future (Kapoor et al, 2012).

The concept of time value of money is simple: the value of money in recent or in current terms is going to be higher than in future terms. This can be further explained that money if earned now would have more value than if the same amount