Introduction to Corporate Finance
and Financial Statements
Key Concepts for Lecture 1
Advantages/Disadvantages of different
The goal of the firm.
Problems financial managers face.
The agency problem.
Balance Sheet and Incom
Practice Problems for FIN3403 Exam I
Income Statement for XYZ (December 31, 2009)
Revenues and other income
Cost of goods sold
Earnings before interest and taxes
Earnings before taxes
Income taxes (@ 43.5%)
Key Concepts and Skills
Understand how to determine the relevant
cash flows for various types of proposed
Be able to compute depreciation expense
for tax purposes
Understand the various methods for
Effective Interest Rates and Loan
Annual Percentage Rate vs Effective
What is the difference between an Annual Percentage
Rate (APR) and an Effective Annual Rate (EAR)?
The APR is the interest rate that is quoted to you, but
FIN 3403 Solutions for Exam1 Practice Problems
Ratio Analysis Problems
XYZs profit margin in 2009 = 6.33% but it was 9.87% in 2008 so they get to keep less of each sale they make than they did
the previous year. They are less profitable in 2009 than 200
Concept Review for Test 1
1) What is the goal of the firm?
2) Explain the three types of business legal organization and know the advantages of each.
3) What are the three main problems a financial manager faces?
4) Know what the agency problem is and why