BUAD 306 spring2008 Homework_1 solutions

BUAD 306 spring2008 Homework_1 solutions - BUAD 306...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
BUAD 306 Homework #1 Solutions 1. Maximize shareholder wealth subject to constraints. 2. An agency problem exists when the principal cannot get the agent to act in the best interest of the principal. Agency problems exist in many relationships, including the CEO and shareholders. 3. 72/10 = 7.2 years 4. CFFA = OCF – NCS – Change in NWC , Where OCF = EBIT + Depr. – Taxes NCS = beginning net FA – ending net FA + Depr. Change in NWC = beginning NWC – ending NWC What is the CFFA identity? CFFA = cash flow to creditors + cash flow to stockholders = OCF – NCS – Change in NWC 5. See problem in chapter 2 pages 37-39. 6. To compare ratios without standardizing them may not make reasonable comparisons across size of firms and types of firms. The ratios are standardized by size, currency, industry, sales, percentages, etc. 7. CA/CL = 708/540 = 1.31 Quick ratio = (CA-INV)/CL = .53 Cash ratio = Cash/CL = 98/540 = .18 Total Debt Ratio = (TA-TE)/TA = (3588-2591)/3588 = .28
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 3

BUAD 306 spring2008 Homework_1 solutions - BUAD 306...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online