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Discussion

1. Imagine that you have a great idea for a new sport complex. Explain how you would go about raising capital to develop your idea.

2. Why is it important to compare a company’s financial statements:

a. with statements of previous years?

b. with statements of other companies in the same industry?

c. with statements of companies in other industries?

3. There can be a market for stocks and bonds only if individuals are willing to buy what others wish to sell. So if every security that is sold is bought, why do prices rise and fall?

4. All investments are risky. How would you evaluate the relative risks of each of the following:

a. Purchasing a house.

b. Investing a similar amount in a new restaurant.

5. There is a saying:”Neither a borrower nor a lender be.” Explain why you agree or disagree with it.

6. How would you explain the statement “The world operates on credit”?

7. What kind of policy would you establish to handle delinquent accounts?

8. Express your vision of the role of selling on credit nowadays and its prospects.

9. Which of the following is a permanent method of finance for a business?

a) bank loans

b) creditors

c) share capital

d) overdraft

e) leasing

10. The directors of a company are planning to install a new computer system in the offices. The computers are expected to last about three years. They will cost 25000 dollars. They are considering three methods of financing:

a) leasing

b) long-term bank loan

c) new share issue

Advise the directors on the most suitable method of finance. Give reasons for your answer.

  1. “Careers opportunities in finance are great”. Outline as many points as you can to support this statement.

  2. Level positions in financial institutions vary greatly.

  3. Would you like to work in the field of financial management? Explain why.

  4. Generally it is the investment area that attracts people to finance. Do you agree with that? Give your own explanation.

Unit VI accounting and audit Warming up

Read the following text and try to prove why accounting is very important in business.

Shazad Nidal has been in business for ten months. He is a tailor making expensive suits. He operates as a sole trader.

Imagine what could happen to his business if he failed to keep a written record of all financial transactions, such as purchases and sales.

He could sell goods on credit to customers without keeping a record of the sale. He could, therefore, overlook the fact that customers still owed him money.

He may order too many raw materials because no record was kept of previous orders.

Shazad may pay all of the business' costs, for example electricity, raw materials and wages, on the same day and then find out that there is no money in the bank.

The profits or losses of the business could not be calculated.

The government tax collector would no be able to check how much tax Shazad owed – a heavy fine could be charged if the tax is not paid.

Obviously, without written financial records the business would soon be in deep trouble.

The financial records of a business are called its Accounts. They should be kept up-to-date and with great accuracy – this is the responsibility of the Accountants.