Question

1. What are the two things financial managers can do to increase firm value?

2. Why is it not necessarily bad for the operating cash flow to be negative for a particular period?

Answer 1

1. A.Financial managers will undertake such products which will help the company in generating a higher rate of return, so that it can beat the cost of debt and it can help the maximize the overall value of the company.

B. Financial manager can also acquire another business or more control over the supply chain network in order to to help the company generate higher rate of return and maximize its overall value in the long run.

2.operational cash flow can be bad at times and it can be helpful for the company because when there is capital expansion or there is undertaking of a new project sometimes,it can be seen that operating profit can be negative in the short run but it will always be positive in the long run so the company will gain through the advantage of expansion and growth.