Financial Risk Management | Solutions

Running head: FINANCIAL RISK MANAGEMENT
Financial Risk Management
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FINANCIAL RISK MANAGEMENT1
Table of Contents
Section 1..........................................................................................................................................2
Question 1....................................................................................................................................2
Question 2....................................................................................................................................2
Question 3....................................................................................................................................2
Question 4....................................................................................................................................2
Question 5....................................................................................................................................3
Question 6....................................................................................................................................3
Question 7....................................................................................................................................3
Question 8....................................................................................................................................3
Question 9....................................................................................................................................4
Question 10..................................................................................................................................4
Section 2..........................................................................................................................................5
Exercise 1.....................................................................................................................................5
Exercise 2.....................................................................................................................................5
Exercise 3.....................................................................................................................................5
Exercise 4.....................................................................................................................................6
References........................................................................................................................................7
Appendix..........................................................................................................................................8
1) Ratio Analysis.........................................................................................................................8

FINANCIAL RISK MANAGEMENT2
2) Growth Rate............................................................................................................................9
3) Cash Flow from Assets..........................................................................................................10

FINANCIAL RISK MANAGEMENT3
Section 1
Question 1
"Going public" establishes a firm's true intrinsic value, and it also insures that a highly liquid
market will always exist for the firm's shares.
The above statement is false or incorrect as going public would definitely establish an intrinsic
value for the firm, but it would not necessarily be creating liquidity for the shares of the
company.
Question 2
The common technique that is usually applied for the purpose of assessing the viability of
the project is the application of Net Present Value Method. The method shows the net benefits or
the value that would be created by the company when the given set of project is accepted (Levin
and Hallgren 2017).
Question 3
In common it is well said that the non-financial corporations are referred as borrower and
individuals as a net savers (Su et al., 2018). There are several ways in which the transfer of
money can well happen between the two parties that is from individuals saving to borrowers via
direct transferring of money and various securities. On the other hand, it can also transfer on an
indirect basis through investment banking (Siziba and Hall 2019).
Question 4
The differentiation done by banks between individuals and corporations for granting loan
is generally done in the form of interest rate charged and the tenure that is associated for the