Class 1 - Questions PDF

Preview

Summary

Class 1...

Description

Introduction Class Participation Questions Students MUST be prepared to answer ALL question during class. Participation points are earned for each question answered. Each question is worth up to 2 possible points. Chapt er1I nt r oduct i ont oFi nanci alManagement Sect i on1. 1FI NANCE:AQUI CKLOOK 

Whatar et hemaj orar easi nfi nanc e ? 1. Cor por at efi nanc e 2. I nv es t ment s 3. Fi nanc i ali ns t i t ut i ons 4. I nt er nat i onalfi nanc e

 Bes i deswant i ngt opas st hi sc l as s ,whydoy ouneedt ounder s t andfi nanc e ? 1. The mos ti mpor t antr eas on t ok now fi nance i st hatIwi l lhav et o mak e fi nanc i aldec i s i onst hatwi l lbe v er y i mpor t antt omeper s onal l y .T oday ,al mos tanyc ompanywi l las kt odec i dehowt oi nv es tmyr et i r ementf unds .Al s o, Ineedt ounder s t andfi nanc ewhens t ar t i ngmyownbus i nes s .Howbi gt hes t udentl oanpay ment sar egoi ngt obe. Sect i on1. 2:BUSI NESSFI NANCEANDTHEFI NANCI ALMANAGER  Whati st hecapi t albudget i ngdec i s i on? 1. Thepr oces sofpl anni ngandmanagi ngafi r m’ sl ongt er mi nv es t ment s .Thefi nanc i almanagert r i est oi dent i f y i nv es t mentoppor t uni t i est hatr ewor t hmor et ot hefi r mt hant heyc os tt oac qui r e.Ev al uat i ngt hes i z e,t i mi ng andr i s koff ut ur ec as hfl owsi st hees s enc eofc api t albudget i ng.  Whatdoy ouc al l t hes pec i fi cmi x t ur eofl ongt er m debtandequi t yt hatafi r mc hoos est ous e ? 1. A fi r m’ sc api t als t r uc t ur er ef er st ot hes pec i fi cmi x t ur eofl ongt er m debtandequi t yt hefi r m us est ofi nanc e oper at i ons . Themanagerhas2c onc er ns :howmuchs houl dt hefi r m bor r ow?,whatar et hel eas tex pens i v es our cesoff unds f ort hefi r m?Al s o,t hemanagerhast odec i dehowandwher et or ai s et hemoney . 

I nt owhatc at egor yoffi nanci almanagementdoesc as hmanagementf al l ?

1. Wor k i ngcapi t alr ef er st oafi r m’ ss hor t t er m as s et s ,s uc hasi nv ent or y ,andi t ss hor t t er ml i abi l i t i es ,s uc hasmoney owedt os uppl i er s . Sect i on1. 3:FORMSOFBUSI NESSORGANI ZATI ON  Whatar et het hr eef or msofbus i nes sor gani z at i on? 1. Sol ePr opr i et or s hi p 2. Par t ner shi p 3. Cor por at i on  Whatar et hepr i mar yadv ant agesanddi s adv ant agesofs ol epr opr i et or s hi psandpar t ner s hi ps ? 1. Adv ant ages : - s i mpl es tt y peofbus i nes st os t ar t , - t hel eas tr egul at edf or m ofor gani z at i on, - t heownerk eepsal lt hepr ofi t s . 2. Di s adv ant ages : - Theownerhasunl i mi t edl i abi l i t yf orbusi nes sdebt s , - Al lbus i nes si ncomei st ax edasper s onali nc ome, - Thel i f eofs ol epr opr i et or s hi pi sl i mi t edt ot heowner ’ sl i f es pan,

- Theamountofequi t yt hatc anber ai s edi sl i mi t edt ot hepr opr i et or ’ sper s onalweal t h–t hi sl i mi t at i onof t en meanst hatt hebus i nes si sunabl et oex pl oi tnewoppor t uni t i esbec aus eofi ns uffic i entc api t al , - Owner s hi pi sdi ffic ul tt ot r ans f ers i nc et hi sr equi r est hes al eoft heent i r ebus i nes st ot henewowner .  Wh yi st hecor por at ef or ms uper i orwheni tc omest or ai s i ngcas h? 1. Ther el at i v eeas eoft r ans f er r i ngowner shi p,t hel i mi t edl i abi l i t yf orbus i nes sdebt s ,andt heunl i mi t edl i f eoft he bus i nes sar et her eas onswhyt hec or por at ef or mi ss uper i orwheni tcomest or ai s i ngc as h. I facor por at i onneedsnewequi t y ,i tc ans el lnews har esofs t ockandat t r ac tnewi nv est or s . Sect i on1. 5:THEAGENCYPROBLEM ANDCONTROLOFTHECORPORATI ON  Whati sanagenc yr el at i ons hi p? 1. Ther el at i ons hi pbet weens t oc khol der sandmanagement . 

Whatar eagenc ypr obl emsandhowdot heyar i se ?Whatar eagenc ycos t s ? 1. Thepos s i bi l i t yofc onfl i c tofi nt er es tbet weent hepr i nc i palandt heagent .I fmanagementdoesnott ak et he i nv es t ment ,t hent hes t oc k hol der smayl oseav al uabl eoppor t uni t y–t hi si soneex ampl eofanagenc yc os t . The owner soft hefi r m wi l lwi sht ot ak ei nv es t ment ,butt hemanagementmaynotbecaus et her ei st he pos s i bi l i t yt hatt hi ngswi l lt ur noutbadl yandmanagementj obswi l lbel os t .



Whati ncent i v esdomanager si nl ar gec or por at i onshav et omax i mi z es har ev al ue ? 1.Managementc ompens at i on–managementwi l lhav easi gni fi c anteconomi ci ncent i v et oi nc r eas es har ev al ue f or2r eas ons :manager i al compens at i onandj obpr os pec t s .

1. Upt ownMar k et si sfi nanc edwi t h45% debtand55% equi t y .Thi smi x t ur eofdebtandequi t yi sr ef er r edt oast he fi r m' s : - Capi t almi x t ur e. 2. Capi t albudget i ngi nc l udest heev al uat i onof3c omponent st oc as hfl ow.Whatar et hey ? - Howmuc hc as ht heyex pec tt or ec ei v e - Whent heyex pec tt or ec ei v ei t - Howl i k el yt heyar et or ec ei v ei t . Ev al uat i ngt hes i z e,t i mi ngandr i s koff ut ur ec as hfl owsi st hees s enc eofc api t albudget i ng. 3.Whi c honeoft hef ol l owi ngi sawor k i ngcapi t al dec i s i on? A.Hows houl dt hefi r mr ai s eaddi t i onalc api t alt of undi t sex pans i on? B.Whatdebt equi t yr at i oi sbests ui t edt ot hefi r m? C.Whati st hecos tofdebtfi nanc i ng? D.Shoul dt hefi r m bor r owmoneyf orfiv eorf ort eny ear s ? E.Howmuc hc as hs houl dt hefir mk eepi nr es er v e ? 4.Whi c honeoft hef ol l owi ngi sac api t als t r uc t ur edec i s i on? A.Det er mi ni ngt heopt i mali nv ent or yl ev el B.Es t abl i s hi ngt hepr ef er r eddebt equi t yl ev el C.Sel ec t i ngnewequi pmentt opur c has e D.Set t i ngt het er msofs al ef orc r edi ts al es E.Det er mi ni ngwhens uppl i er ss houl dbepai d 5. Mar gi eopenedaus edbook s t or eandi sbot ht he100per centownerandt hes t or e' smanager .Whi c ht y peofbus i nes s ent i t ydoesMar gi eowni fshei sper s onal l yl i abl ef oral l t hes t or e' sdebt s ? -Sol epr opr i et or s hi p 6. Mat tandAl i c i ac r eat edafi r mt hati sas epar at el egalent i t yandwi l ls har eowner s hi poft hatfi r m ona75/ 25bas i s .Whi c h t y peofent i t ydi dt heycr eat ei ft heyhav enoper s onall i abi l i t yf ort hefi r m' sdebt s ?

-c or por at i on 7.Whi c honeoft hef ol l owi ngf or msofbus i nes sor gani z at i onoffer sl i abi l i t ypr ot ect i ont osomeofi t sowner sbutnott oal lof i t sowner s ? -par t ner s hi p...