Impression on Finance Discussion
To start with, my general impression on finance was blurred with uncertainty. The terms alone seemed to be hard to grasp at first, due to some difficulties with terminology, but I’ve managed to learn the material through the semester.
Capital Budgeting topic has actually brought me to realize financial point of view on everyday budget planning. Capital budgeting, in fact, is the process in which a business determines and evaluates potential expenses or investments, including such projects as building or investing in a long-term venture. Naturally, due to the fact that capital available is always limited, capital budgeting techniques were developed to determine which projects will yield the most return over an applicable period of time.
Capital Budgeting seem to be useful in the real life as well, since the capital budgeting techniques can be applied to managing personal finances. If you perceive a capital that you own as company’s capital, it will be easier to determine whether to take a 2-week trip, or to invest in a promising venture.
In addition to that, Cost of Capital and Long Term Financing was also a practical topic. The concept of capital cost is used for financing business, and depends on the mode of financing used. It may be referred as cost of equity, or the cost of debt. Same as with capital budgeting, cost of equity and cost of debt models can be applied to the real life situations, to analyze the cost of actual personal equity. Cost of capital sources varies from company to company, as well as person to person, and depends on such factors as operating history, profitability and credit worthiness.
I believe that studying finance on the basic level should become a part of high school program, as it brings a framework for managing personal finances more efficiently.
References
Capital Budgeting | Techniques | Introduction. (2017). Accountingexplained.com. Retrieved 20 January 2017, from http://accountingexplained.com/managerial/capital-budgeting/
Cost Of Capital. (2017). Investopedia. Retrieved 20 January 2017, from …
