Corporate Financial Management: Time, Risks and Returns

This paper focuses or examines the assessment of financial decisions concerning two of the itemized strands above; that is Time and Risks. It analyzes the time value of money, how time affects return and risks, and the importance of risk evaluation in making good use of superannuation investments.

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Corporate Financial Management
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CORPORATE FINANCIAL MANAGEMENT
Introduction
Too often corporate financial management documentaries concentrate on various
crunching issues of investments. Usually, in practice, the numbers side of things is peripheral at
best, probably of a lesser effect than the strategic problems of the investment decisions. Now,
just like the activity-based cost, it is all too simple to concentrate on the monetary aspects to the
exclusion of the non- financial factors (Gallery and Palm 2011). Therefore, to be a successful
employee in all theses perhaps misleading factors and adopt the classification related to activity
based cost, a new strand emerges: Time, Risks, Returns and consequently quality. This paper
focuses or examines the assessment of financial decisions concerning two of the itemized strands
above; that is Time and Risks.
Time
The lead time to investment implementation is usually one of the variables to which the
investment outcomes are most sensitive. In this context, the tertiary sector employees should of
course estimate or calculate both the probability of delays as part of the risk management
strategy and the financial effect as an integral part of the assessment of the sensitivity of the final
returns (Brigham et al. 2016). There may exist the scope for varying the order in which the super
fund is assessed or the amount of the superannuation contributions into the defined benefit plan.
Either way, one must know all the investments opportunities available and be aware of their
costs and long and long-term benefits. Various techniques like the critical path analysis are very
essential for assisting an individual’s choices concerning the timing and the related value of the
super fund.

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These assessments and the techniques may be used to minimize the risks attached to a
superannuation investment while quantifying the range or the extent of the increased
involvement. The most familiar form of individual scheduling challenge, for the tertiary sector
employees, is the job scheduling. Financial scholars and professionals are frequently involved in
the identification of the most profitable investment choices (Chandra 2011). They are bound to
appreciate and fully understand how monetary value fluctuates over time. The time value of
money is, therefore an integral concept for the financial planners, accountants, business
managers and consequently the employees to know because its utilization ore application will
provide them a more transparent image of how to invest money and develop their companies
(Gallery and Palm 2011). The time value is a significant aspect of finance, stating that the
resources like for example, money existing at present may be worth more than the very same
amount in the future. This is founded on the notion of potential earning capacity (Brealey et al.
2012). The fundamental aspect of this notion is that money can accrue and earn interest and
increase in value over time, thus, it poses a more significant profit in the present. Some
professionals also argue that it is financially beneficial for an individual to have a certain amount
of money and spend it the very same time, since things like inflation, devaluations or even the
stock market crash may reduce the purchasing power of the same amount in the future. Time
value aspects apply to all segments of financial management and can probably be consulted
during the determination of capital budgeting techniques, bond and stock valuation, leaning,
financial vehicle analysis, investments and cost of capital (Black and Kirkwood 2010). Time and
again the need for investment decisions is to attain the long-term goals of either the firm or the

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workers, preserving a share of a specific market and to maintain leadership in some economic
activity.
In many occasions or situations, professionals like for example the accountants; use the
time value of money when undertaking some critical investments choices and even the budgeting
decisions. In times of enormous share market volatility, it may seem inappropriate for an
employee to put his or her superannuation contributions in the minimal risk options to try to
reduce loses over the short term. However, such reactions to short-term possibilities may
significantly decrease the employees' super fund balance over the long term (Zhang and Zhu
2009). Therefore, when monitoring any investment performance, it is essential to take into
consideration that switching between options from time to time may not yield more returns in the
long run. Similarly, before changing your investment choices and options or how you invest your
superannuation contributions, it is critical for a person to ensure that he or she fully comprehend
the range of investment options available, the time frame allocation for that particular investment
and subsequently the ultimate impact of changing the investment option.
How Time affects return and risks
Time is the very fundamental role player when it comes to investments. Usually, as a
standard rule, it can be said that it is your time in the market, but not your timing of the market.
With that said the most significant opportunities to maximize the potential resources to achieve
superior long-term returns lies in the aforementioned fact. For instance, when an employee or an
individual invests his or her superannuation contributions in a defined benefit plan, he or she is
making a long-term investment (Aebi and Schmid 2012). This denotes that the short-term decline
in the value of their investments may not have a significant effect on the balance over time-based

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upon the investment period frame. However, one still needs to reflect on his or her interest in the
risks and the time frame he would expect the superannuation to take. Generally, the longer a
person’s investment horizon, the smaller the effect that risk or otherwise the market volatility
may have on that persons’ ultimate superannuation balance and the more time he or she may
want to put out the variability of returns or profits in the short term. On the contrast, if a person
expects to accrue high level of returns in the end, then, he or she must accept the fact that high
levels of risks must be involved (Nijskens and Wagner 2011). That is why it is very appropriate
for any employee or any person to understand or have the full insight of the level of their risks
profile before putting their money into any investment choice plan.
Risks
Having a better understanding of the aspects of risks and return and the way they are
probably influenced by time is taken to be one of the most vital issues of making good use of
your superannuation. Risks and return are considered as the integral role players in how much
money or benefits an employee will seemingly pose when he or she retires, or the amount of
pension income one can draw (McNeil and Embrechts 2015). Therefore, understanding how they
operate and the perspective or your approach toward the risks can help you make very critical
decisions regarding the investments that best meet your financial demands and goals. The focus
on the returns frequently arouses the concerns and evaluation about of the risks attached to every
investment opportunity. Either way, the investment or the managerial decisions require the
necessary facts about the risks and the projected returns to be available. Risk evaluation should,
at the very least, include an assessment of the probability and outcomes of the ideal and worst
scenarios (Brigham and Houston 2012). Ideally, this may incorporate the likelihood distribution

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of all the possible results, such that realistic and logical considerations can be established on that
particular risk or return compromise. Now, where the risks projected can be seen to be normally
distributed; then, the risks background or profile of the investment position or decisions may be
likely to have both the positive-negative outcomes. It can be noted that projections of cash flows
are only considered to be estimates, such that the possibilities attached to such views can only be
seen as figments of the imagination (Christoffersen 2012). However, if we can pose facts or
evidence to suggest that one result or outcome is having a higher probability than another, then
that can be remarkable, and potentially relevant, information that can be included into the
analysis of the investments (Hull 2012). For the alternative outcomes, the probability estimates
can be combined through decision making to indicate the distribution of possibilities. Investment
risks are the possibilities that you may lose all your money resources on the investment of your
choice or that your investment may not keep up with aspects of inflation.
According to financial professionals, all investments have got risks; however, the level of
risks is dependent on the type of investment one has chosen. As already itemized above, the
higher level of risks associated with an investment, the more potential to deliver you higher
investment returns (Cumming 2009). For example, Leveraged oil ETFs are subjects to high
volume trading activity, and they are well known for their high levels of volatility. Otherwise,
they can prove or give the investors speedy and huge amounts or returns or losses depending on
how these investors can make the trade out of it. The value of oil can be equivalently volatile,
and therefore, making the trading activity to show or reflects an amplified level of volatility in its
prices. At the point when individuals consider risks, it's more often than not with a measure of
anxiety (Black and Kirkwood 2010). We tend to connect risk with falling offer costs, all things

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considered; the risk is available in each one of the asset classes: money, settled premium, offers,
and property.
An adjustment in the cost of an offer is only one type of risks, known as volatility. It is
the degree to which the estimation of an investment climbs up and down after some time.
Development assets, for example, shares and property, include higher instability than defensive
ventures like money and fixed interest. On the plus side, this implies they're likewise prone to
give a higher return over the long term. Now and then (amid the GFC, for instance) we encounter
the dark side of volatility, where anybody with an introduction to the share market – either
straightforwardly or through their superannuation finance – is probably going to see their
portfolio diminish in value (Hirsch et al. 2011). At the point when this happens, a typical result is
to embrace a more cautious approach to deal with investments, with attention to protective
resources. While this may lessen short-term tensions, over the more extended term it can cause
considerably more tension since it might imply that you won't wind up with enough cash to
accomplish your money related objectives (Luke and Verreynne 2011). A significantly more
sensible approach is to comprehend the connection amongst risks and return with the goal that
you can decide the most appropriate blend of investments.
As an investor, it's essential to consider to what extent you're investing for. If you have
time on your side, you might have the capacity to acknowledge the more volatility that runs with
development investments keeping in mind the end goal to accomplish possibly higher returns
over the long term. Distinctive asset classes perform better at various circumstances, so it's
conceivable to lessen volatility (and still pick up the general outcome you're after) by spreading
your cash over, and inside, the diverse asset classes (Gallery et al. 2011). This is known as

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diversification, or just not putting all your investments tied up in one place. In case you're alright
with the level of risks and enhancement in your portfolio, the most imperative thing to do when
markets fall isn't to freeze (Gallery and Palm 2011). With investments moving in cycles, by and
large, the most exceedingly bad time to offer is when markets are falling because you can miss
the subsequent recovery.
Conclusion
In summary, the paper analyzes the two factors that should be considered when making
your superannuation investments. The time value is a significant aspect of finance, stating that
the resources like for example, money existing at present may be worth more than the very same
amount in the future. Apparently, the longer a person's investment horizon, the smaller the effect
that risk or otherwise the market volatility may have on that persons' ultimate superannuation
balance and the more time he or she may want to put out the variability of returns or profits in
the short term. Finally, Risk evaluation should, at the very least, include an assessment of the
probability and outcomes of the ideal and worst scenarios.

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