mount of time that begins with the start of the inventory conversion period and ends with the firm's cash payment
3 satisfy its payable obligation.
he difference between the end of the payables deferral period and the end of the receivables conversion per
cm the perspective of the purchaser, the account payable is a spontaneous source of financing. while the account
:ceivable is a spontaneous investment made in its customer. In general, a firm is required to pay its account
ayable, a cash CHJtDW. before it
Description Financing Policy
Long-term capital finances some of the permanent current Aggressive approach I
assets, but short-term debt finances all temporary current assets
and some permanent assets.
Long-term capital finances all permanent assets, but
O A penalty tax consideration
I Q The net earnings restriction
O Restricljve covenants
O The insolvency restriction
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company's dividend policy can also be affected by factors internal to the organization and by the external
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'. Factors that inuence dividend policy M Aa a
Jividend decisions are complicated and involve the understanding of critical strategic factor
A firm's value depends on its expected free cash flow and its cost of capital. Distributions made in the form of
dividends or stock repurchases impact the firm's value and the investors in different ways.
Consider the case of Green Mountain Pro
ihid1 of the following best explains why Green Mountain's stock price increased as it did?
0 The clientele effect
I Q The signaling hypothesis
0 Dividend irrelevance theory
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ihich of the following statements is true?
I Q Taxes on divid
Attempts: 4 5 Average: 41.5 .-' S
1. Dividend policy and free cash flow u Aa _:
Companies. especially established corporations, set up a policy that is often called a dividend policy or a payout
These policies specify what companies intend to do w
2. Define the cash conversion cycle and explain the components of it.
According to our eText, the cash conversion cycle is the net time interval between the collection of cash
receipts from product sales and the cash payments for the companys various reso
1. Why is working capital management important to a company? Are there particular industries where
managing working capital is more important?
Working capital is the difference between a companys current assets and their current liabilities; it is
1. Do investors generally prefer dividends or share repurchases? Support your answer
It is difficult to state whether investors generally prefer dividends or share repurchases as I believe it
depends on the circumstance. There are positive and negative as
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1. What are some practical limitations for a company in trying to maximize the amount of leverage (debt)
used in the capital structure?
As we have discussed in previous weeks, a companys capital structure is a combination of both debt and
equity. In an id
ren your findings for European Satellite Corporation above, construct an inoome statement using the revised
mat. For simplieitys sakeand for this portion of the problem onlyassume the following:
- .illn'g,r semivan'able oost is oomposed of a 50% variable-
Review the traditional format income statement for European Satellite Corporation that follows. and classify.r the
indicated costs as being fixed, semivariable, or variable in nature.
European Satellite Corporation
for the Year Ending Mar
111e computation and interpretation of the degree of nancial leverage cfw_DFL A, Aa
5 December 31. Last year. Galaxy Corporation had sales of $120.D, and it forecasts that next year's sales
I be $124.E,. Its fixed costs have beenand are expected to connue
5. analvzlng nslclness using me degree or leverage 5, ha
Select the degree of leverage that completes the following sentence.
The degree of combined leverage cfw_DCL)v is the percentage change in EPS that results from a given percentage
change in sales. a
Computing and interpreting the degree of operating leverage cfw_III-0L] u Aa
5 December 31. Last year, Western Gas 31 Electric Company cfw_WGEC had sales of $8,000,000, and it forecasts the
ct year's sales will be $8,560,000. Its fixed costs have b
1. What are the arguments in support of using debt as part of the capital structure?
There are many different opinions regarding using debt as part of the capital structure however there are
many advantages. Those in favor of using debt as part of the cap
5. Understanding business nancial risks on ha
The total risk in a firm is determined by evaluating the firm's business risk and financial risk.
As an analyst. Olivia is comparing two nearigrur identical
manufacturing firms: Red Hamster Manufacturing Compa
[LS 1.0 1.5 2.0
DEBTEllJUITIr HIE RATII]
orn what you see on the graph, whid'i of the following assumptions is oonsistent with the graph?
G The firm's debt is risk free.
0 The firm's expected ret
n 1958 Franco Modigliani and Merton Miller (MM) published a set of research papers that revolutionized the theory
I corporations capital structure. In their first research paper. MM proposed a set of assumptions that. on the surfac
nay seem unrealistic, b
I HUI-II 1-: III "IIIIIIE" Ill-l IlllllIIl I I" 3 Ha
:Insider the following environmental and firm characteristics and determine their effect on a firm's business or
'ue or False: All other things being equal, firms with more debt or other f
E. Business and nancial risk As Aa
The impact of nancial leverage on return on equityr and earnings per share
Consider the following case of Happy Turtle Transportation Company:
Suppose Happy Turtle Transportation Company is considering a project
Chapter 21 1. Can a creditor of both the husband and wife under the same obligation obtain an
execution against a Winnebago mobile home owned by the husband and wife in tenancy by
Yes, a creditor of both the husband and wife can obtain an execut
2. Explain some of the factors that affect the cost of capital and describe whether or not it is
something that a company can control.
There are a few factors that affect the cost of capital, some of which the company can control and others
they cannot. T
1. Why is the WACC used in capital budgeting?
The weighted average cost of capital (WACC) refers to the calculation of the average after-tax cost of a
companys capital. All capital sources including common stock, preferred stock, bonds and any other
1. What are some factors that affect capital structure decisions made by management?
The capital structure is part of the financial structure and demonstrates how a firm finances its overall
operations and growth. Some factors that affect capital structur
Impeachment of Bill Clinton
Impeachment of Bill Clinton
Histories, Mysteries, & Scandals 2228
Professor Christopher Pollock