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STUST-GMBA
JAVZMAA GANBAATAR
MA3N0223
What is the finances fundamental idea?
Risk
Return
The probability of loss inherent in financing methods
which may impair the ability to provide adequate return.
Thus risks result from a variety of factors including
uncertainly about future revenues, expenditures and taxes.
Also risk results almost entirely from the uncertainty
about future cash inflows, because the initial cash outflow
is generally known.
The planning process used to determine whether an organization's
long term investments, such as new machinery, replacement
machinery, new plants, new products, and research development
projects are worth pursuing.
+ The risk that can arise here involves the potential that a
chosen action or activity (including the choice of inaction) will
lead to a loss.
= RISK IN CAPITAL BUDGETING
Sensitivity
analysis
Scenario
analysis
Breakeven
analysis
NPV - Net Present Value
CF -Annual Cash Flow
PVIFA - Present Value of the Interest payment
Factors annuity
- State Farm and its policyholders disputed
whether some of the damage was caused by
wind, which is covered under the
homeowner’s policy, or flooding, which is
not covered under the policy.
- About 2 percent of the State Farm claims associated
with the Hurricane Katrina had not been settled as of
early 2007.
- So a number of lawsuits were filed to try to force State
Farm to pay more than State Farm adjusters deemed
appropriate.
- State Farm announced that it would
suspend writing new homeowners and
commercial property insurance in
Mississippi.
- State Farm Senior Vice President Bob
Tipp said that “ We will continue to
serve our existing policyholders, write
new auto insurance policies and
market our financial services products
as long as market conditions allow,
but the current legal and business
environments with regard to
homeowner and commercial insurance
are becoming untenable ”
 State
Farm’s primary concern is that provisions
in its insurance policies are being reinterpreted
after the fact-through lawsuits-to provide for
coverage's that were not contemplated when the
policies were written.
 The state of Mississippi has considered legislation
that would require State Farm to continue to issue
new policies.
 But all companies face a variety of risks as they
conduct their daily business.
 Each company must assess the risks of conducting
its current business and the risks associated with
new projects.