Finance professionals make decisions that fall into three distinctive areas: corporate finance, capital markets, and investments.

Below is a set of decisions made by finance professionals. Categorize the decisions according to the area of finance to which they belong.

1. Radford is a small company that manufactures automobile bearings. Managers at the company must make decisions on the kind and the cost of equipment to buy.

2. Chris works for a financial advising firm. he must create a financial plan and come up with a list of securities that his client can invest in. Chris must make decisions regarding the investments that he should recommend to his client to include in his or her portfolio.

3. Brandon works for an investment bank and makes decisions about the sale of new common stock by ABCL Inc.

Question

Business

Jerry Short

1 November, 11:07

Finance professionals make decisions that fall into three distinctive areas: corporate finance, capital markets, and investments.

Below is a set of decisions made by finance professionals. Categorize the decisions according to the area of finance to which they belong.

1. Radford is a small company that manufactures automobile bearings. Managers at the company must make decisions on the kind and the cost of equipment to buy.

2. Chris works for a financial advising firm. he must create a financial plan and come up with a list of securities that his client can invest in. Chris must make decisions regarding the investments that he should recommend to his client to include in his or her portfolio.

3. Brandon works for an investment bank and makes decisions about the sale of new common stock by ABCL Inc.

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Answers (1)

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Brent · Answer 1

1. Radford is a small company that manufactures automobile bearings. Managers at the company must make decisions on the kind and the cost of equipment to buy - Investments.

2. Chris works for a financial advising firm. he must create a financial plan and come up with a list of securities that his client can invest in. Chris must make decisions regarding the investments that he should recommend to his client to include in his or her portfolio - Corporate Finance.

3. Brandon works for an investment bank and makes decisions about the sale of new common stock by ABCL Inc. - Corporate Finance.

Explanation:

(1) Option no. 1 relates to the decision making with respect to production equipments. This decision making falls into the category of Capital budgeting (fixed assets investing) decisions. These kind of decisions are investing decisions and thereby will fall under investments domain.

(2) Option no. 2 majorly relates to the functioning of important functions by an financial advising firm, which are necessary for its value creation. Hence, the decision will fall under Corporate Finance and not in Capital markets domain, as making a financial plan for portfolio recommendation to clients is the major activity of any Financial Advising firm.

(3) Option no. 3 again relates to the decision making by an investment bank, which is at the heart of its operations i. e. Initial Public Offer or Follow on Public Offer advisory to a firm. Hence, the decision making falls under Corporate Finance.