internal reporting
function of an accounting system gives managers
information needed for daily operations and also for
long-range planning. Developing types of
information most relevant to specific m
What is corporate governance?
the system of internal controls and
procedures by which individual
companies are managed
In regards to a company's board,
investors and shareowners should?
(4)
1. determi
What are internal factors that affect working
capital?
1. company size and growth rates
2. organizational structure
3. sophistication of working capital management
4. borrowing and investing positions
Maximize shareholder wealth
The goal of financial management is to maximize the
current value per share of existing stock. This eliminates
ambiguity of short-term vs. long-term goals because
sharehold
What percent of the observations are with 1,2 & 3
standard deviations?
1 - 68%
2 - 95%
3 - 99%
What is skewness?
returns are not symmetric around the mean
What does a distribution look like if it is l
What is the asset beta?
an unlevered beta. It reflects the business risk of the
assets
What do you calculate the beta of an asset?
= Beta of equity ( (1)/ (1 + (1-t)D/e)
How do you calculate the flota
What does it mean if markets are
informationally efficient?
the price in the market is an unbiased
estimate of all future discounted cash
flows
What is systematic risk?
risk that cannot be avoided and
How to you calculate the Average Accounting Rate
of Return (AAR)?
= (average net income) / (average book value)
What is the Profitability Index?
the present value of a project's future cash flows
divi
How do you calculate the degree of financial
leverage (DOL)?
= (% change in net income) / ( % change in
operating income)
or
= (Q(P-V)-F / Q(P-V) - F -C
What is the degree of total leverage?
a measure
Chapter 9 & Chapter 14 Homework
Homework Problems:
(1) Company BW has issued 2,000 corporate bonds with a maturity value of $1,000
and a couple rate of 6%. Coupon payments are made every 6 month and t
capital structure
the mix of long-term debt and equity financing
restructuring
process of changing the firm's capital structure without
changing its real assets.
MM's proposition I (debt irrelevance p