Financial Decision Making Assignment Example | Topics and Well Written Essays - 500 words

Financial Decision Making - Assignment Example 3. The fundamental role of the financial market is to enable companies to raise money. a) The money markets deal with bonds, while the capital markets deal with stocks. b) The primary market occurs when a company issues a stock for the first time in an initial public offering (IPO). The selling and buying of stocks on Wall Street by investors represents the secondary market c) A spot market is a market in which commodities and securities are sold for cash and are delivered immediately, while a future market deals with contracts that give the buyer the right to a buy a predetermined amount of stocks or bonds at a future point in time (Altiusdirectory, 2011). 4. Capital budgeting deals with the financing of company projects. For example if a company wants to open a second manufacturing facility the financing for such a venture would be consider a capital budgeting project. 5. One of the goals of a company’s governance system is to maximize shareholder wealth. The particular fina ncial incentives offered by a firm are not consider a part of its governance system. Usually all financial incentives are known by the employees, but at times companies pay the employees special bonuses which are not a part of the traditional incentive system. This occurs when a company has a very good accounting period. 6.