Financial Management Assignment: Investment Options and IPO Process

This document provides a comprehensive solution to a financial management assignment, addressing key financial concepts and processes. It includes an analysis of a discount offered by a supplier, detailing the terms and implications. The assignment explores various investment options, such as Roth IRAs, stock investments, and corporate bonds, outlining their characteristics, benefits, and potential returns. Additionally, it elucidates the step-by-step process of an Initial Public Offering (IPO), from engaging an investment bank to SEC approval and prospectus preparation. References to relevant academic sources are also provided to support the analysis. This assignment offers valuable insights into financial decision-making and market operations.

Financial Management

Q2. The 5% discount is offered by the supplier. The discount can be received within 15 days. If
the discount is not received then, the amount will be paid within 60 days.
Q4. Three options for investment:
Following are the three options with its working and reasons:
1. Open a Roth IRA
Working
There are two types of IRA, namely, traditional IRA and Roth IRA.
 Traditional IRA gives the tax deduction on the contributed amount. For example,
an individual with the age of 49 can contribute maximum $5,500 in 2015 (Dolvin
et al., 2014). The tax has to be paid on the income earned from the mandatory
distributions but not longer than the age of 70.5.
 A Roth IRA has no upfront tax benefit, but it has incredible back-end benefit.
There is no tax on the capital gains till the unqualified withdrawals. There is no
regulation on the distribution by the age of 70.5. The account holder has the
choice to letting time and the magic of principle of compounding.
Reasons
It owes nothing on the capital gains taxes till the account holder does not make any
unqualified withdrawals. There are no regulations requiring by the age of 70.5.
2. Open an account of stock investment
Working
It is the investment of funds in the electronically traded funds which represents the
particular sector. The minimum investment account provides an incredible diversity of
funds (Gottschlich et al., 2014).
Reasons
It is the consistent generator of wealth in the long run and has short term investments. For
example money market accounts.
3. Corporate bonds
Working
The corporate bonds provide an inflation topping coupon rate which bound to make
income seeking investors smile.
Reasons
It provides the steady return on the investment with a great chance of preservation of
capital (Asquith et al., 2013).
Q5. Process of IPO
It is the first sale of the stick by an organization. Following are the steps of Initial public
offerings:

Step: 1
The company fires an investment bank for the handling of initial public offerings.
Step: 2
After the signing of underwriting deal between the bank and investment bank, the
registration statement is put together by the bank for filing with SEC.
Step: 3
The final step is the working of SEC with the company to decide the date of initial public
offerings (Lowry et al., 2016). After the approval of SEC, the underwriters must be put
together with a prospectus which includes all the financial information of the company
regarding IPO.

References
Dolvin, S. D. (2014). Traditional vs. Roth IRA.
Gottschlich, J., & Hinz, O. (2014). A decision support system for stock investment
recommendations using collective wisdom. Decision support systems, 59, 52-62.
Asquith, P., Au, A. S., Covert, T., & Pathak, P. A. (2013). The market for borrowing corporate
bonds. Journal of Financial Economics, 107(1), 155-182.
Lowry, M., Michaely, R., & Volkova, E. (2016). Information Revelation Through Regulatory
Process: Interactions between the SEC and Companies Ahead of the IPO. Available at SSRN
2802599.