Fin 571

Bussiness Regulation Simulation
Felix Tapia
University of Phoenix
Puerto Rican Business Law – LAW/531PR
Israel Camacho Alicea
                                                  June 4, 2013

Financing decisions determine how a firm will raise capital. Examples of financing

decisions include securing a bank loan or selling debt in the public capital markets.

Capital budgeting involves deciding which productive assets the firm invests in, such

as buying a new plant or investing in the renovation of an existing facility.

Financial managers should select a capital project only if the value of the projects

expected future cash flows exceeds the cost of the project. In other words, firms

should only make investments that will increase their value, and thus increase the

stockholders’ wealth.   Working capital management is the day-to-day management

of a firm’s short-term assets and liabilities. Working capital can be managed by

maintaining the optimal level of inventory, managing receivables and payables,

deciding to whom the firm should extend credit, and making appropriate investments

with excess cash. The answer that does not pertain to corporations is: c. Are the

easiest type of business to form.   The three main components of an executive

compensation package are: base salary, bonus based on accounting performance

and compensation tied to the form’s stock price.

Financial managers are concern with three fundamental decisions when running a

Business. The first one is the Capital budgeting decisions which identifies the

productive assets the firm should buy. Secondly the Financial decisions which

determine how the firm should finance and pay for assets and the last one Working

Capital Management decision that works to determine how day to day financial

matters should be managed so that the firm can pay its bills and how surplus cash

should be invested.