Business Finance Chapter 6 Risk and Its Measurements 6.2 The Return on an Investment

The Return on an Investment - Business Finance - ثاني ثانوي

An Introduction to Basic Finance

1.1 The Divisions of Finance

1.2 Key Financial Concepts

1.3 Finance and Other Business Disciplines

Summary

The Role of Financial Markets and Financial Intermediaries

2.1 Financial Markets

2.2 Financial Intermediaries

2.3 Regulation of Financial Institutions

Summary

Analysis of Financial Statements

3.1 General Accounting Principles

3.2 The Balance Sheet

3.3 The Income Statement

3.4 Statement of Cash Flows

3.5 Financial Statement Analysis

3.6 Liquidity Ratios

3.7 Activity Ratios

3.8 Profitability Ratios

3.9 Leverage Ratios

3.10 Coverage Ratios

3.11 Limitations of Accounting Data

Summary

An Introduction to Financial Markets

4.1 Markets

4.2 The Mechanics of Investing in Securities

4.3 Special Security Purchases

4.4 Measures of Securities Prices

4.5 Foreign Securities

4.6 Competition in the Securities Markets

Summary

Opportunity Costs and the Time Value of Money

5.1 Opportunity Costs

5.2 The Future Value of a Single Amount

5.3 The Future Value of a Series of Amounts (Annuity)

5.4 The Present Value of a Single Amount

5.5 The Present Value of a Series of Amounts (Annuity)

5.6 Other Time Value of Money Situations

Summary

Chapter 6 Risk and Its Measurements

Risk and Its Measurements

6.1 Risk

6.2 The Return on an Investment

6.3 The Sources of Risk

6.4 Risk Measurements

6.5 Risk Management Strategies

Summary

Stock and Bonds

7.1 Sources of Funding

7.2 Common Stock

7.3 Dividend Policy

7.4 Preferred Stock

7.5 Bonds

7.6 Retiring Debt

Summary

Cost of Capital

8.1 Cost of Capital Components

8.2 A Weighted-Average Cost of Capital

8.3 The Optimal Capital Structure

8.4 Other Capital Structure Issues

Summary

Glossary

An Introduction to Basic Finance

1.1 The Divisions of Finance

1.2 Key Financial Concepts

1.3 Finance and Other Business Disciplines

Summary

The Role of Financial Markets and Financial Intermediaries

2.1 Financial Markets

2.2 Financial Intermediaries

2.3 Regulation of Financial Institutions

Summary

Analysis of Financial Statements

3.1 General Accounting Principles

3.2 The Balance Sheet

3.3 The Income Statement

3.4 Statement of Cash Flows

3.5 Financial Statement Analysis

3.6 Liquidity Ratios

3.7 Activity Ratios

3.8 Profitability Ratios

3.9 Leverage Ratios

3.10 Coverage Ratios

3.11 Limitations of Accounting Data

Summary

An Introduction to Financial Markets

4.1 Markets

4.2 The Mechanics of Investing in Securities

4.3 Special Security Purchases

4.4 Measures of Securities Prices

4.5 Foreign Securities

4.6 Competition in the Securities Markets

Summary

Opportunity Costs and the Time Value of Money

5.1 Opportunity Costs

5.2 The Future Value of a Single Amount

5.3 The Future Value of a Series of Amounts (Annuity)

5.4 The Present Value of a Single Amount

5.5 The Present Value of a Series of Amounts (Annuity)

5.6 Other Time Value of Money Situations

Summary

Chapter 6 Risk and Its Measurements

Risk and Its Measurements

6.1 Risk

6.2 The Return on an Investment

6.3 The Sources of Risk

6.4 Risk Measurements

6.5 Risk Management Strategies

Summary

Stock and Bonds

7.1 Sources of Funding

7.2 Common Stock

7.3 Dividend Policy

7.4 Preferred Stock

7.5 Bonds

7.6 Retiring Debt

Summary

Cost of Capital

8.1 Cost of Capital Components

8.2 A Weighted-Average Cost of Capital

8.3 The Optimal Capital Structure

8.4 Other Capital Structure Issues

Summary

Glossary

6.2 The Return on an Investment

6.2 The Return on an Investment

The Sources of Return

Return

Dividends

Capital gain

6.2 The Return on an Investment

The Expected Return and The Required Return

Expected return

Required return

6.2 The Return on an Investment

Assume Abdullah works for a mutual fund company.

6.2 The Return on an Investment

Assume you are analyzing an expected return on stocks. The expected returns of these stocks under different economic conditions are shown in the table below:

Now analyze an expected return on a second stock:

The expected return on an investment includes both the expected income plus expected price appreciation.

The difference between the discounted rate and the maturity rate is the capital gain.

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