CHAPTER 7
Accounting for Financial Management
(Difficulty: E = Easy, M = Medium, and T = Tough)
True-False
Easy:
(7.1) Annual report
Answer: a Diff: E
1
.
The annual report contains four basic financial statements: the income
statement; balance sheet; sta
CHAPTER 1
AN OVERVIEW OF FINANCIAL MANAGEMENT
(Difficulty: E = Easy, M = Medium, and T = Tough)
True-False
Easy:
(1.2) Goal of firm
Answer: b Diff: E
1.
The proper goal of the financial manager should be to maximize the
firm's expected profit, since this
CHAPTER 22
Providing and Obtaining Credit
(Difficulty: E = Easy, M = Medium, and T = Tough)
True-False
Medium:
(22.2) Credit period
1
.
Answer: b
Diff: M
The credit period is the amount of time it takes to do a credit search
on a potential customer.
a. Tr
CHAPTER 23
OTHER TOPICS IN WORKING CAPITAL MANAGEMENT
(Difficulty: E = Easy, M = Medium, and T = Tough)
True-False
Medium:
(23.2) Target cash balance
Answer: b Diff: M
1
.
The cash balances of most firms consist of transactions, compensating,
precautionar
Chapter 28
Credit and Inventory Management
Prof. Kainan Wang
Key Concepts and Skills
Understand the key issues related to credit
management
Understand the impact of cash discounts
Be able to evaluate a proposed credit policy
Understand the major compo
Chapter 27
Cash Management
Determining the Target Cash Balance
Prof. Kainan Wang
27A-0
Costs of Holding Cash
Costs in dollars of
holding cash
Trading costs increase when the firm
must sell securities to meet cash needs.
Total cost of holding cash
Opportun
1. Because the investment has a cash inflow of $25,000 every year, at the end of year 4, the cumulative
cash flow is $100,000 which is equal to the cost of the project. So, payback period = 4 years
2. To figure out the discounted payback, we need to compu
1. Your brother borrows $3,500 from you and promises to return the money over time as follows;
$500 in one year, $1,000 in two years and $3,000 in four years. What is the present value of these
cash flows if the interest rate is 8%? How much money do you
FINA 4080 Solutions - Financial Statements
1.
The long-term debt account will increase by $10 million, the amount of the new long-term
debt issue. Since the company sold 10 million new shares of stock with a $1 par value, the
common stock account will inc
Chapter 6
Making Capital Investment Decisions
Prof. Kainan Wang
6-0
Key Concepts and Skills
Understand how to determine the relevant cash flows for
various types of capital investments
Be able to compute depreciation expense for tax
purposes
Incorporat
HW2: NO DUE DATE
1. Use the balance sheet and income statement and compute the following ratios.
(a) In 2008, how many days on average did it take Bayside to sell its inventory?
(b) What is the debt-equity ratio for 2008?
(c) What is the times interest ea
Chapter 2
Financial Statements and Cash Flow
Prof. Kainan Wang
2-0
Key Concepts and Skills
Understand the information provided by financial
statements
Differentiate between book and market values
Know the difference between average and marginal tax
rates
Chapter 27
Cash Management
Prof. Kainan Wang
27-0
Key Concepts and Skills
Understand the importance of float and how it
affects the cash balance
Understand how to accelerate collections and
manage disbursements
Understand the advantages and disadvantag
Chapter 26
Short-Term Finance and Planning
Prof. Kainan Wang
26-0
Key Concepts and Skills
Understand the components of the cash cycle and why it
is important
Be able to prepare a cash budget
Understand the various options for short-term financing
26-1
Chapter 3
Financial Statements Analysis and Financial
Models
Prof. Kainan Wang
3-0
Key Concepts and Skills
Know how to standardize financial statements for
comparison purposes
Know how to compute and interpret important financial
ratios
Be able to deve
CHAPTER 21
WORKING CAPITAL MANAGEMENT
(Difficulty: E = Easy, M = Medium, and T = Tough)
True-False
Easy:
(21.2) Net working capital
Answer: b Diff: E
1
.
Net working capital may be defined as current assets minus current
liabilities. This also defines the
CHAPTER 9
Financial Planning and Forecasting Financial Statements
1
Topics in Chapter Financial planning Additional Funds Needed (AFN) formula Forecasted financial statements
Sales forecasts Percent of sales method
2
Financial Planning and Pro Forma Stat
CHAPTER 10
Determining the Cost of Capital
1
Topics in Chapter
Cost of Capital Components
Debt Preferred Common Equity
WACC
2
What types of long-term capital do firms use?
Long-term debt Preferred stock Common equity
3
Capital Components
Capital comp
Chapter 12
Capital Budgeting: Decision Criteria
1
Topics
Overview and "vocabulary" Methods
NPV IRR, MIRR Profitability Index Payback, discounted payback
Unequal lives Economic life
2
What is capital budgeting?
Analysis of potential projects. Long-term
Chapter 23
Other Topics in Working Capital Management
1
Topics in Chapter
Setting the target cash balance EOQ model Baumol Model
2
Setting the Target Cash Balance
Theoretical models such as the Baumol model have been developed for use in setting target
CHAPTER 17
Distributions to Shareholders: Dividends and Repurchases
1
Topics in Chapter
Theories of investor preferences Signaling effects Residual model Stock repurchases Stock dividends and stock splits Dividend reinvestment plans
2
What is "distributi
CHAPTER 19
Lease Financing
1
Topics in Chapter
Types of leases Tax treatment of leases Effects on financial statements Lessee's analysis Lessor's analysis Other issues in lease analysis
2
Who are the two parties to a lease transaction?
The lessee, who u