FAQ1R - BMGT 340 Questions and Answers First Exam What will...

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BMGT 340 – Questions and Answers First Exam What will the exam be like? 21 multiple-choice questions, with one as a bonus question. The chapters that the questions come from are posted under “Exam Info.” What is the best way of studying for the exam? Read the chapters Review your lecture notes Go through CONNECT practice problems Work the review problems posted on the web site under “Exam Info.” Prepare an 8 ½ x 11 sheet of paper (one side) listing the main formulas and concepts from the four chapters – boiling down all this material into one page is a good way to learn the material. What is a good way to study for the problems that need to be worked backwards? The best way to understand the problems is to practice. I recommend you go to “Exam Info” at look at the past two semesters’ exams and practice on these problems. Are we expected to know all the formulas by heart? No, write out anything you want on your sheet of paper that you bring to the exam. Does a typical finance test look more like an accounting test or is it theoretical like a marketing test? In finance you get the best of both – problems and theory. What are agency costs? The specific agency costs are categorized as follows: 1. Monitoring costs - what the board expends (in time, effort or money) to make sure management is acting in the best interest of shareholders. This could be in the form of personal time, or hiring someone to check what managers are doing/spending. 2. Bonding costs - what managers spend (again, in time or money) to assure shareholders that they are acting in their best interests. This might be in the form of buying a lot of shares so their personal wealth is tied up in the company. 3. Residual loss. This is the cost of managers' making decisions that are not in the best interest of shareholders. Examples of this are management spending money on excessive perks - like a big office, expensive paintings in the office, a company plane, etc. It could be management accepting less risky and therefore less return projects to keep the company safe so they don't risk bankruptcy, even if the riskier projects might be more rewarding to shareholders. Where do we find the numbers we need for ratios? Here it will be most helpful if you are very familiar with what information is contained in each ratio, for example, to know that profit margin is net income/sales, and
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that both of these numbers are found on the income statement. When something changes you should know what impact this will have on that ratio, for example, if sales increase by 5% and expenses increase by 10%, then profit margin will decrease. You said ratios should raise questions about the company’s performance, but how do I know what problems are causing the ratios to be lower? Ratio analysis tells you what questions to ask.
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FAQ1R - BMGT 340 Questions and Answers First Exam What will...

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