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Two Week Individual Assignment 1 Running head: WEEK TWO INDIVIDUAL ASSIGNMENT Week Two Individual Assignment University of Phoenix Week Two Individual Assignment 2 .1 Chapter Study Questions Prepare responses to the following chapter study questions located in Chapter 14 of the Financial Management: Principles and Applications text, by Keown. .a 14-1 .b 14-3 .c 14-4 .d 15-12A .e 15-13A 14-1.. What are financial markets? What function do they perform? How would an economy be worse off without them? Financial markets are essentially the primary means which assists people in purchasing, sell, and trading financial securities such as bonds and stocks. Financial markets basically direct funds from agents to lenders, and vice-versa. Some forms of financial markets are money markets, bond markets, capital markets, commodity markets, and even insurance markets. Borrowers would need to locate their own lenders if there were not financial markets. However, banks make this much easier for borrowers by taking deposits and lending out money in an organized way. Financial markets basically distribute the supply of savings from a surplus to ones with a deficit. The economy would surely experience difficulties devoid of a financial market system due to a lack of overall wealth. Everyday business activities would lack necessary funding. 14-3. Distinguish between the money and capital markets. Money markets entail people both borrowing and lending according to a prescribed period of time; in addition, they involve short-term maturities. On the other hand, capital markets maintain long-term maturities, which greatly assist in companies being able to raise necessary Week Two Individual Assignment 3 capital. Basically, money markets make transactions possible utilizing short-term financial means, and capital markets make transactions possible long-term utilizing financial means. 14-4. What major benefits do corporations and investors enjoy because of the existence of organized security exchanges? Major benefits in which both corporations and investors can enjoy include the reassurance that their investment was provide at a fair market value, and the capacity to assist companies in raising new capital. It (1) provides a continuous market, (2) establishes and publicizes fair prices for securities, (3) and assists in raising new capital. As such, price volatility is minimized. 15-12A. (Break-even point) You are a hard-working analyst in the office of financial operations for a manufacturing firm that produces a single product. You have developed the following cost structure information for this company. All of it pertains to an output level of 10 million units. Using this information, find the break-even point in units of output for the firm. Return on operating assets = 25% Operating asset turnover = 5 times Operating assets = $20 million Degree of operating leverage = 4 times (see Excel spreadsheet) 15-13A. (Break-even point and operating leverage) Allison Radios manufactures a complete line of radio and communication equipment for law enforcement agencies. The average selling price of its finished product is $180 per unit. The variable cost for these same units is $126. Allison Radios incurs fixed costs of $540,000 per year. 1. What is the break-even point in units for the company? Week Two Individual Assignment 4 2. What is the dollar sales volume the firm must achieve in order to reach the breakeven point? 3. What would be the firms profit or loss at the following units of production sold: 12,000 units? 15,000 units? 20,000 units? 4. Find the degree of operating leverage for the production and sales levels given in part (c). (see Excel spreadsheet) ... View Full Document

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