Chapter $15$

Financial Decisions and Risk Management

Learning Objectives

After reading this chapter, you should be able to:

LO $15\mathrm{.}1$ Describe the responsibilities of a financial manager. LO $15\mathrm{.}2$ Distinguish between short$-$term $($operating$)$ and long$-$term

$($capital$)$ expenditures. LO $15\mathrm{.}3$ Identify three sources of short$-$term financing for businesses.

LO $15\mathrm{.}4$

Identify three sources of long$-$term financing for businesses.

LO

$15\mathrm{.}5$ Discuss the value of common stock and preferred stock to shareholders and describe the secondary market for each type of security.

LO

$15\mathrm{.}6$ Explain the process by which securities are bought and sold.

LO

$15\mathrm{.}7$ Describe the investment opportunities offered by mutual funds, exchange$-$traded funds, hedge funds, and commodities.

LO

$15\mathrm{.}8$ Explain how risk affects business operations and identify the five steps in the risk management process.

Legendary Canadarm Maker $($MDA$)$ Goes Public

high$-$profils products that Canada has ever produced. The Canadarm gained fame as an integral part of the Iritamational Space Station for the support it provides to astronauts in their various missions.

As a child, did you dream of becoming an astronaut? Have you ever caught yourself stargazing and dreaming of a world beyond our own? NASA and companies like SpaceX and Blue Origin are now setting their sights on reaching Mars with a human crew. There are dreams of space tourism and moon colonies on the horizon; this is truly a time of renewed inter$-$ est in the space industry. Ambitious dreams are slowly getting closer to reality as private investment has entered an arena once reserved for powerful governments. Are you intrigued by that possibility? Regardless of your answer, technology is advancing and space travel for scientific purposes $($or for eventual touristic goals$)$ is still a challenge. However, one of the companies that is right in the middle of it all is MDA $($for$-$ merly known as MacDonald, Dettwiler and Associates$).$ It was essentially started in a bassment in Vancouver, but today it is a diverse company that also makes one of the most famous

Today, MDA has over $2,000$ employees and is described as an international space mission partner and innovator in the fields of robotics, satelite systems, and geo$-$Intelligence. This is a very good place to be$.$ In fact, the Chamber of Commerce in the United States projects that the space industry will generate $$1\mathrm{.}5$ trillion in economic activity annually by $2040.$ It is already a trillion$-$dollar industry today. High$-$profile businesspeople like Jeff Bezos $($Blue Origin$).$ Elon Musk $($SpaceX$),$ and Richard Branson $($Virgin Galactic$)$ are among the top investors in a new space future. They are promoters in the sector not just because of their roles in their

companies but also es enthusiasts who are daring to dream