10 Axioms of Management

34問 • 5ヶ月前

問題一覧

This axiom states that the greater the risk of an investment, the higher the expected return should be to compensate for that risk. Investors demand higher returns from riskier ventures.

RISK-RETURN TRADE-OFF

Every financial decision should be evaluated by considering the risk level and the corresponding expected return.

RISK-RETURN TRADE-OFF

Money today is worth more than the same amount in the future because today’s money can be invested to earn interest, and inflation decreases future purchasing power.

TIME VALUE OF MONEY

Receiving cash sooner or investing earlier leads to greater wealth accumulation.

TIME VALUE OF MONEY

It the rationale behind discounting future cash flows to present value and compounding investment returns over time.

TIME VALUE OF MONEY

Profit or net income shown on accounting statements is not as important as actual cash flow since cash can be used directly to pay bills, invest, or distribute dividends.

CASH IS KING

Accounting profits include many non-cash items and are affected by timing differences (accrual basis). Thus, cash flow is the true indicator of a firm's financial health and operational success.

CASH IS KING

Financial decisions should focus only on the additional cash flows directly caused by that decision, ignoring sunk costs or unrelated cash flows.

INCREMENTAL CASH FLOWS

Only what changes in cash flow as a result of a particular course of action matters for investment appraisals or financing choices.

INCREMENTAL CASH FLOWS

Because of competition, sustained abnormal profits are difficult to achieve unless an organization differentiates itself significantly or achieves strong cost advantages.

CURSE OF COMPETITIVE MARKETS

This explains why finding highly profitable projects is challenging in open markets.

CURSE OF COMPETITIVE MARKETS

Financial markets quickly and accurately incorporate all available information into asset prices.

EFFICIENT CAPITAL MARKETS

Therefore, it is tough for investors or managers to consistently earn above-average returns without assuming extra risk, as prices already reflect fundamental data and news.

EFFICIENT CAPITAL MARKETS

Not all risks affect decisions equally.

ALL RISKS ARE NOT EQUAL

Some risks (unsystematic risk) can be diversified away by holding a portfolio of assets, while others (systematic risk) cannot and must be compensated through higher expected returns.

ALL RISKS ARE NOT EQUAL

Understanding the nature and impact of different types of risk is critical in financial management.

ALL RISKS ARE NOT EQUAL

Taxes influence cash flows and investment choices.

TAXES AFFECT BUSINESS DECISIONS

After-tax returns, not just pre-tax profits, drive decisions.

TAXES AFFECT BUSINESS DECISIONS

Effective financial management involves careful planning to legally minimize tax liabilities and optimize cash flows.

TAXES AFFECT BUSINESS DECISIONS

Managers (agents) may not always act in the best interest of shareholders (principals), leading to conflicts of interest.

AGENCY PROBLEM

Financial management must implement controls, incentives, and governance structures to align managers’ decisions with shareholders' wealth maximization.

AGENCY PROBLEMS

Trust and ethical conduct are foundational.

ETHICAL BEHAVIOR IS ESSENTIAL

Unethical behavior damages reputations, erodes investor confidence, and can lead to financial and legal troubles.

ETHICAL BEHAVIOR IS ESSENTIAL

Sustainable financial success relies on maintaining integrity and transparency in all financial activities.

ETHICAL BEHAVIOR IS ESSENTIAL

Higher risk requires higher expected return

RISK-RETURN TRADE-OFF

Money now is worth more than money later due to earning potential and inflation

TIME VALUE OF MONEY

Actual cash flows determine financial health, not accounting profits

CASH IS KING

Consider only the additional cash flows resulting from a decision

INCREMENTAL CASH FLOWS

Sustained large profits are rare without clear competitive advantage

CURSE OF COMPETITIVE MARKETS

Differentiate diversifiable from non-diversifiable risks

ALL RISKS ARE NOT EQUAL

Taxes impact cash flows and investment choices

TAXES AFFECT BUSINESS DECISIONS

Managers' interests may conflict with shareholders'; governance is required

AGENCY PROBLEM

Integrity and transparency underpin sustainable finance

ETHICAL BEHAVIOR IS ESSENTIAL

Market prices quickly reflect all known information

EFFICIENT CAPITAL MARKETS

Laws on Rizal

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Laws on Rizal

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19th century

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19th century

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Prelim

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Prelim

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Values Development for Citizenship Training

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Values Development for Citizenship Training

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Lesson 4

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Lesson 4

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LESSON 5 & 6

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LESSON 5 & 6

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lesson 7

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lesson 7

58問 • 9ヶ月前

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Nature and Concept of Management

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Nature and Concept of Management

56問 • 5ヶ月前

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Lesson 2

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Lesson 2

73問 • 5ヶ月前

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Lesson 2

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Planning and Strategy

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Midterm Exam

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Midterm Lesson 4

Ella Mae Hilot · 50問 · 4ヶ月前

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50問 • 4ヶ月前

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問題一覧

This axiom states that the greater the risk of an investment, the higher the expected return should be to compensate for that risk. Investors demand higher returns from riskier ventures.

RISK-RETURN TRADE-OFF

Every financial decision should be evaluated by considering the risk level and the corresponding expected return.

RISK-RETURN TRADE-OFF

Money today is worth more than the same amount in the future because today’s money can be invested to earn interest, and inflation decreases future purchasing power.

TIME VALUE OF MONEY

Receiving cash sooner or investing earlier leads to greater wealth accumulation.

TIME VALUE OF MONEY

It the rationale behind discounting future cash flows to present value and compounding investment returns over time.

TIME VALUE OF MONEY

Profit or net income shown on accounting statements is not as important as actual cash flow since cash can be used directly to pay bills, invest, or distribute dividends.

CASH IS KING

Accounting profits include many non-cash items and are affected by timing differences (accrual basis). Thus, cash flow is the true indicator of a firm's financial health and operational success.

CASH IS KING

Financial decisions should focus only on the additional cash flows directly caused by that decision, ignoring sunk costs or unrelated cash flows.

INCREMENTAL CASH FLOWS

Only what changes in cash flow as a result of a particular course of action matters for investment appraisals or financing choices.

INCREMENTAL CASH FLOWS

Because of competition, sustained abnormal profits are difficult to achieve unless an organization differentiates itself significantly or achieves strong cost advantages.

CURSE OF COMPETITIVE MARKETS

This explains why finding highly profitable projects is challenging in open markets.

CURSE OF COMPETITIVE MARKETS

Financial markets quickly and accurately incorporate all available information into asset prices.

EFFICIENT CAPITAL MARKETS

Therefore, it is tough for investors or managers to consistently earn above-average returns without assuming extra risk, as prices already reflect fundamental data and news.

EFFICIENT CAPITAL MARKETS

Not all risks affect decisions equally.

ALL RISKS ARE NOT EQUAL

Some risks (unsystematic risk) can be diversified away by holding a portfolio of assets, while others (systematic risk) cannot and must be compensated through higher expected returns.

ALL RISKS ARE NOT EQUAL

Understanding the nature and impact of different types of risk is critical in financial management.

ALL RISKS ARE NOT EQUAL

Taxes influence cash flows and investment choices.

TAXES AFFECT BUSINESS DECISIONS

After-tax returns, not just pre-tax profits, drive decisions.

TAXES AFFECT BUSINESS DECISIONS

Effective financial management involves careful planning to legally minimize tax liabilities and optimize cash flows.

TAXES AFFECT BUSINESS DECISIONS

Managers (agents) may not always act in the best interest of shareholders (principals), leading to conflicts of interest.

AGENCY PROBLEM

Financial management must implement controls, incentives, and governance structures to align managers’ decisions with shareholders' wealth maximization.

AGENCY PROBLEMS

Trust and ethical conduct are foundational.

ETHICAL BEHAVIOR IS ESSENTIAL

Unethical behavior damages reputations, erodes investor confidence, and can lead to financial and legal troubles.

ETHICAL BEHAVIOR IS ESSENTIAL

Sustainable financial success relies on maintaining integrity and transparency in all financial activities.

ETHICAL BEHAVIOR IS ESSENTIAL

Higher risk requires higher expected return

RISK-RETURN TRADE-OFF

Money now is worth more than money later due to earning potential and inflation

TIME VALUE OF MONEY

Actual cash flows determine financial health, not accounting profits

CASH IS KING

Consider only the additional cash flows resulting from a decision

INCREMENTAL CASH FLOWS

Sustained large profits are rare without clear competitive advantage

CURSE OF COMPETITIVE MARKETS

Differentiate diversifiable from non-diversifiable risks

ALL RISKS ARE NOT EQUAL

Taxes impact cash flows and investment choices

TAXES AFFECT BUSINESS DECISIONS

Managers' interests may conflict with shareholders'; governance is required

AGENCY PROBLEM

Integrity and transparency underpin sustainable finance

ETHICAL BEHAVIOR IS ESSENTIAL

Market prices quickly reflect all known information

EFFICIENT CAPITAL MARKETS