CHAPTER 1 AN OVERVIEW OF FINANCIAL MANAGEMENT
(Difficulty: E = Easy, M = Medium, and T = Tough)
(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 2 Basic Financials Statement
Assets= Liabilities + owners equity
An increase in assets must be balanced by an equal and offsetting increase in liabilities and/or
equity or a decrease in other assets.
Financial reporting is dominated by two stateme
Merchant Co. expects to sell 10,000 units at $120 each. Each unit is expected to require 2lbs. of material
@ $10/lb. and 3 direct labor hours @ $5/DLH. The overhead rate is estimated to be $15/DLH. The
beginning inventories are: DM 1,000 lbs. an
Chapter 1 the Nature of Accounting
Accounting is the process of recording, classifying and communicating financial information
concerning the economic activity of an enterprise.
Accounting information is gathered and reported in accordance with Generally
Demand & Supply
Economist use the model of demand and supply to analyses how buyers and sellers interact in the
marketplace. It shows how market prices are determined and it demonstrated how many units of a good
or services will be bought and
Comparative Advantage and the Benefits of Trade
The opportunity cost of any life activity is the costs of what you five up to partake in that
Factors of Production
All the productive resources of the earth may be put in one of the fol
Finance Ch 6
Assume that the risk-free rate is 5%. Which of the following statements is
If a stock's beta doubled, its required return under the CAPM would also
If a stock's beta doubled, its required return under the CAPM would
FINANCE CH 2
Which of the following are current assets?
III. accounts payable
Which of the following statements is CORRECT?
Depreciation reduces a firm's cash balance, so an increase in depreciation w
FINANCE CH 5
One of the basic relationships in interest rate theory is that, other things held
constant, for a given change in the required rate of return, the_the time
to maturity, the_the change in price.
FINANCE CH 3
Aurillo Equipment Company (AEC) projected that its ROE for next year would be just
6 percent. However, the financial staff has determined that the firm can increase its
ROE by refinancing some high interest bonds currently outstand
FINANCE CH 4
The stated rate of interest is 10%. Which form of compounding will give the highest
effective rate of interest?
It is impossible to tell without knowin
What is project management, and what are the key elements of an effective project management
Projects are the way that much of an organizations work gets done.
IT related projects are not always successful.
Chapter 6 Problem 1
Betty Yeager has been operating a dental practice for the past five years. As part of her practice
she provides a dental hygiene service. She has found that her costs for this service increase with
patient load. Costs for this service
Chapter 6- Assessing Merger and Acquisition Targets
The terms merger and acquisition are often used interchangeably, and "merger" typically refers
to any business combination.
Technically, for legal and accounting purposes, a merger is a business combinat
Chapter 7- Financing Investments
In every financing decision, three questions are addressed: (1) How much funding is needed? (2)
What is the firm's capitalization policy? (3) What is the firm's dividend policy?
Each of the three issues have strategic and
An accounting transaction is an economic event that affects the financial position of a
Chapter 5 Analysis of Financial Statements
Users and Objectives of Statement Analysis
Chapter 6 Activity Analysis, Cost Behavior, and Cost Estimation
Explain the relationship between cost estimation, cost behavior and cost prediction
How does a managerial accountant determine the cost behavior pattern for a particular cost item?
RESEARCH ARTICLE CRITIQUE
1. EACH STUDENT MUST FIND TWO RECENT (NO LATER THAN 4 YEARS)
RESEARCH ARTICLES FROM THE LISTED JOURNALS IN THE AREAS OF
FINANCIAL MANAGEMENT/ CORPORATE FINANCIAL POLICIES
2. GET INSTRUCTORS APPROVAL
3. DO A CRITIQUE OF EACH ARTIC
COVARIANCE OF ASSET RETURNS
COVARIANCE OF THE RETURNS OF TWO ASSETS X AND Y IS COMPUTED AS :
COVARIANCE (X,Y) = X,Y = (rXi rX) (rYi rY) Pi
rXi = the ith possible return of asset X
rX = the expected return of asset X
rYi = the ith possi
CAPITAL BUDGETING - SPECIAL APPLIACTIONS
OPTIMUM CAPITAL BUDGET
(PP. 422-423 OF TEXT); POWER POINT SLIDES 60-66 FOR CH. 12
WHEN THERE IS NO CAPITAL RATIONING:
1. LOOK AT ALL AVAILABLE OPPORTUNITIES (PROJECTS) AND SORT THEM
AS INEPENDENT PROJECT
TIME VALUE OF MONEY PROBLEMS
1. You currently have $1,250 to invest. You want to take risk that will correspond to an annual
return of 11%, compounded annually. How much will your investment be worth at the end
of 13 years?
2. How much should one i
CAPITAL STRUCTURE :CHAPTERS 15 AND 16
BUSINESS RISK AND FINANCIAL RISK
THE BUSINESS RISK OF A FIRM ( OR A PROJECT) RELATES TO THE
VOLATILITY OF THE RETURN ON THE EQUITY OF ITS
SHAREHOLDERS WHEN THE FIRM IS 100% EQUITY FINANCED, I.E.,
THE FIRM HAS NO DEBT
FINANCE CH 1
One key value of limited liability is that it lowers owners' risks and thereby enhances
a firm's value.
Suppose the U.S. Treasury announces plans to issue $50 billion of new bonds.
Assuming the announcement wa