...focus on the __________.3. Under perfect competition, allocation of resources shall be based on the goal of ________. 4. _______ is based on cash flows. 5. _________ consider time value of money. 6. What are the main goals of financial management? 7. ________ lead to investment in real assets. 8. _____ relate to the acquisition of funds at the least cost. 9. Formulation of inventory policy is an important element of _______. 10. Obtaining finance is an important function of _________. 11. What are the two critical issues to be considered under investment decisions? 12. Define rate of return. 13. The most important decision made by a finance manager is ________. Answers to Self Assessment Questions 1. Liberalisation and globalisation of Indian economy 2.procurement of funds 3. Profit maximisation. 4. Wealth maximisation 5. Wealth maximisation 6. Profit Maximisation and Wealth Maximisation 7. Investment decisions. 8. Financing decisions 9. Liquidity 10. Treasurers 11. The two critical issues are – evaluation of expected profitability of the new investment rate of return required on the project 12. Rate of return is normally defined as the hurdle rate or cut-off rate or opportunity cost of the capital 13. Dividend decision | Unit 2 Financial Planning | Self Assessment Questions Fill in the blanks 1. Corporate objectives could be group into ___ and ___. 2. Control mechanism is developed for _____ and their effective use. 3. Seasonal peak requirements to be met from __________________...
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...Chapter 1 UNDERSTANDING INVESTMENTS Multiple Choice Questions Establishing a Framework for Investors 1. Which of the following is the best definition of wealth? a. the sum of all current and future income b. the total of all assets and all income c. the total of assets and income less any liabilities. d. the sum of current income and the present value of future income. (d, moderate) 2. Stocks and bonds would be classified as: a. real assets b. indirect assets c. personal assets d. financial assets (d, easy) 3. Technically, investments include: a. only financial assets. b. only marketable assets. c. financial and real assets that are marketable or non-marketable. d. only financial and real assets that are marketable. (c, easy) 4. The retirement plans that guarantee retirees a set amount of money each month are known as: a. 401(k) plans b. self-directed plans c. defined-benefit plans d. defined-contribution plans (c, moderate) The Importance of Studying Investments 5. The investment professionals that arrange the sale of new securities are called: a. arbitragers b. traders c. investment bankers d. specialists (c, moderate) 6. Another name for stockbrokers is: a. specialists ...
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...Chapter 1,2,3 – Answers to Assigned End of the Chapter Questions 1-1. Shareholder (owner) wealth maximization is the most widely cited business goal. The justification for shareholder wealth maximization is that managers are hired by the owners (shareholders) and serve as their agents. In addition, the well-being of the managers is closely tied to the wealth of the shareholders. In perfect competition, shareholder wealth maximizing behavior is necessary just to survive. 1-2. a. Wealth maximization for a single-period decision is measured by economic profit which is the excess of earnings or cash flow over that which could have been earned on investments of similar risk. b. Wealth maximization for a multi-period decision is measured by discounting the expected future economic profits (which is the excess of earnings or cash flow for each period over that which could have been earned on investments of similar risk for that period) back to present. 1-4. Present value is either a single future amount discounted back to present or the sum of a number of future amounts discounted back to present. Net present value is the sum of the present value and the initial outlay or outlays necessary to produce the future amount(s). 1-5. A capital investment is an outlay that is expected to result in benefits extending more than one year into the future. Capital budgeting is the process of selecting capital investments. 1-6. Steps in capital budgeting process: ...
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... 1. Shortening delivery times is a minor part of the quality improvement process. Answer: False Difficulty: 2 Objective: 1 Shortening delivery times is a major part of the quality improvement process. 2. ISO 9000 developed by the International Organization for Standardization is a set of five international standards for quality management adopted by more than 85 countries. Answer: True Difficulty: 2 Objective: 1 3. Quality of design measures how closely the characteristics of products or services meet the needs and wants of customers. Answer: True Difficulty: 2 Objective: 1 4. In the banking industry, depositing a customer's check into the wrong bank account is an example of quality of design failure. Answer: False Difficulty: 2 Objective: 1 This is an example of conformance quality failure. 5. Costs of quality (COQ) reports usually do not consider opportunity costs. Answer: True Difficulty: 2 Objective: 1 6. A control chart identifies potential causes of failures or defects. Answer: False Difficulty: 2 Objective: 2 This is a definition of a Pareto diagram. 7. A cause-and-effect diagram is used to help identify potential causes of defects. Answer: True Difficulty: 2 Objective: 2 8. Allocated cost amounts are an important determinant of the costs of a quality improvement program. Answer: False Difficulty: 2 Objective: 3 Allocated costs are usually ignored in calculating...
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...ASSESSMENT COVER SHEET |Unit Number and Title |Unit 2: Managing Financial Resources and Decisions | |Assessment Title |Managing Financial Resources and Decisions | |Course Title |HND Business | |Assessment Code |HND Bus-Unit 2/Managing Finance May 2013 | |Hand Out Date |27th May 2013 |Hand In Date |26th July 2013 | |Lecturer(s) |Mr. Haider |Internal Verifier | | | |Mr. David Ogila | | | | |Mr. Daniel R. | | | |Sources of information |Course Notes / Slides / Activities / Handouts. ...
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...borrowers D. a large increase in loan default due to unemployment 2. The financial crisis that started in 2006 was magnified by which of the following: A. Public concern over the war in Afghanistan B. Consistently increasing oil and gas prices C. Ethical issues affecting high value investment D. Mortgage lenders securitizing large quantities of their loans 4. This subarea of finance involves methods and techniques to make appropriate decisions about what kinds of securities to own, which firms' securities to buy, and how to be paid back in the form that the investor wishes. A. real markets B. investments C. financial management D. none of these 5. This subarea of finance looks at firm decisions in acquiring and utilizing cash received from investors or from retained earnings. A. investments B. financial management C. treasury management D. none of these 7. This subarea of finance helps facilitate the capital flows between investors and companies. A. investments B. financial management C. treasury management D. financial institutions and markets 10. This is a general term for securities like stocks, bonds, and other assets that represent ownership in a cash flow. A. investment B. financial asset C. real asset D. financial markets 12. Which of the following managers would NOT use finance? A. Operational managers B. Marketing managers C. Human resource managers D. All of these would use finance 15. This type of business organization is relatively easy...
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...Running head: DIVIDENDS, CAPITAL STRUCTURES DECISIONS Dividends, Capital Structures Decisions Ma. Cesarlita G. Josol MBA - Acquisitions Strayer University 1 DIVIDENDS, CAPITAL STRUCTURES DECISIONS 2 Use the following information for Questions 1 through 3: Boehm Corporation has had stable earnings growth of 8% a year for the past 10 years and in 2013 Boehm paid dividends of $2.6 million on net income of $9.8 million. However, in 2014 earnings are expected to jump to $12.6 million, and Boehm plans to invest $7.3 million in a plant expansion. This one- time unusual earnings growth won’t be maintained, though, and after 2014 Boehm will return to its previous 8% earnings growth rate. Its target debt ratio is 35%. Calculate Boehm’s total dividends for 2014 under each of the following policies: Growth rate Net Income Dividend Dividend/Net Income Ratio Dividend/Net Income % 8% 2013 $9.8 $2.6 0.265306 26.5306% 2014 $10.584 $2.808 2014 $12.600 $3.34 QUESTION #1: Calculate Boehm’s total dividends for 2014 if its 2014 dividend payment is set to force dividends to grow at the long-run growth rate in earnings. Step 1: Find the dividend / net income ratio for 2013 Dividend/ Net Income Ratio = Dividend 2013 / Net Income2013 = $2.6 million / $9.8 million = 0.265306 Dividend/Net Income Ratio = 26.5306 % **The dividend/net income ratio will be used as the rate for the projection of dividends Step 2: Calculate the 2014 projected net income...
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...Multiple Choice Questions 1. This book is mainly about A) financial decisions made by households B) financial decisions made by corporations C) financial decisions made by governments D) none of the above Answer: B Type: Easy Page: 3 2. Finance, generally, deals with A) money B) markets C) people D) all of the above Answer: D Type: Easy Page: 3 3. The following are examples of the United States-based corporations except: A) General Motors B) Microsoft C) Bank of America D) Unilever Answer: D Type: Easy Page: 3 4. The following are examples of foreign-based corporations except: A) British Petroleum B) Volkswagen C) General Electric D) Sony Answer: C Type: Easy Page: 3 5. Businesses can be organized as A) sole proprietorships B) partnerships C) corporations D) any of the above Answer: D Type: Easy Page: 3 6. Generally, a corporation is owned by the: A) Managers B) Board of Directors C) Shareholders D) All of the above. Answer: C Type: Easy Page: 3 7. Limited liability is an important...
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...authority to make the decisions incurring the costs. For example, if the sales manager accepts a rush order that will result in higher-than-normal manufacturing costs, these additional costs are charged to the sales manager because the authority to accept or decline the rush order was given to the sales manager. This type of accounting system is known as A. Responsibility accounting. B. Functional accounting. C. Reciprocal allocation. D. Transfer price accounting. Answer (A) is correct. (CMA, adapted) REQUIRED: The system in which additional costs are charged to the manager with authority for their incurrence. DISCUSSION: In a responsibility accounting system, managerial performance should be evaluated only on the basis of those factors directly, regulated (or at least capable of being significantly influenced) by the manager. For this purpose, operations are organized into responsibility centers. Costs are classified as controllable and non-controllable, which implies that some revenues and costs can be changed through effective management, If a manager has authority to incur costs, a responsibility accounting system will charge them to the manager’s responsibility center. However, controllability is not an absolute basis for establishment of responsibility. More than one manager may be able to influence a cost, and responsibility may be assigned on the basis of knowledge about the incurrence of a cost rather than the ability to control it. Answer (B) is incorrect Functional...
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...of 2 points | | | ________________ involves making decisions relating to issuing and investing in stocks and bonds.Answer | | | | | Selected Answer: | Investment management | Correct Answer: | Investment management | | | | | Question 2 2 out of 2 points | | | Economists use a ___________________ framework to explain how the prices and quantities of goods and services are determined in a free-market economic system.Answer | | | | | Selected Answer: | supply-and-demand | Correct Answer: | supply-and-demand | | | | | Question 3 0 out of 2 points | | | The goal of the financial manager in a profit-seeking organization is to maximize:Answer | | | | | Selected Answer: | the value of perquisites. | Correct Answer: | the owners’ wealth. | | | | | Question 4 0 out of 2 points | | | ________________ involves the sale or marketing of securities, the analysis of securities, and the management of risk through portfolio diversification.Answer | | | | | Selected Answer: | financial management | Correct Answer: | investments | | | | | Question 5 2 out of 2 points | | | Maximizing _____________________ is accomplished through effective financial planning and analysis, asset management, and the acquisition of financial capital.Answer | | | | | Selected Answer: | the owners’ wealth. | Correct Answer: | the owners’ wealth. | | | | | Question 6 2...
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...is the process of planning expenditure on assets or projects that can have a long-term impact on an institution. Examples of capital projects Adopting a new enterprise-wide software system Launching a new advertising campaign Replacing factory equipment Expanding sales into a new market Building a road Why is capital budgeting important? Helps firm make smart decisions Capital projects large and expensive- not easy to change course Allows management team to give input and be on same page Capital budgeting techniques include: Payback Period Discounted Payback Period Net Present Value (NPV) Internal Rate of Return (IRR) Profitability Index (PI) Payback Period- The Concept What is it? The payback period for a project is the expected time it will take to recover the original investment. The decision rule: Accept project if its payback period is less than the maximum allowed. Payback Period- An Example A project requires a $100,000,000 investment and is expected to generate the following cash flows in the years after the investment is made Year 1 2 3 4 5 Cashflow ($) 20,000,000 40,000,000 60,000,000 30,000,000 10,000,000 What is the payback period? Payback Period- Example cont’d Workings: Year 1 2 3 4 5 Cashflow ($) 20,000,000 40,000,000 60,000,000 30,000,000 10,000,000 Cumulative Cashflow 20,000,000 60,000,000...
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...affect financial management in the new millennium. • Briefly explain the responsibilities of the financial staff within an organization. • Describe the advantages and disadvantages of alternative forms of business organization. • State the primary goal in a publicly traded firm, and explain how social responsibility and business ethics fit in. • Define an agency relationship, give some examples of potential agency problems, and identify possible solutions. • Identify major factors that determine the price of a company’s stock, including those that managers have control over and those that they do not. • Discuss whether financial managers should concentrate strictly on cash flow and ignore the impact of their decisions on EPS. LECTURE SUGGESTIONS Chapter 1 covers some important concepts, and discussing them in class can be interesting. However, students can read the chapter on their own, so it can be assigned but not covered in class. We generally spend much of the first day going over the syllabus and discussing grading and other mechanics relating to the course. To the extent that time permits, we talk about the topics that will be covered in the course and the structure of the book. We also discuss briefly the fact that it is assumed that managers try to maximize stock prices, but that they may have other goals, hence that it is useful to tie executive compensation to stockholder-oriented performance measures. If time permits, we think...
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...TABLE OF CONTENTS Title Page Question Paper Answer 1 Answer 2 Answer 3 Answer 4 Soft Copy 1 2 4 5 6 8 Question 1, What types of decisions must Chad Thomas make daily for his company’s operation to run effectively? Over the long run? In operation managements, there are basically ten critical decisions. Those are; Service and product design, Quality management, Process and capacity design, Location, Layout design, Human resources and job design, Supply-chain management, Inventory management, Scheduling, and finally Maintenance decision. Based on Chad’s Creative Concepts case study, I can conclude that Chad Thomas is now need to make those decisions to make sure the operation of his company flows effectively without stopping at any stage up to the current situation. The situation that Chad is facing is between the manufacturing and turn over. There is no problem with his existing staffs according to the case text. Therefore, Chad now needs to focus on inventory, scheduling, and maintenance to make the right decisions for each of it. Based on text, his manufacturing of standard line has many raw materials in manufacturing as work in process. This makes the progress is slow and caused Chad’s company unable to make a good turn over. They came across a critical situation as their finance status is not promising and not satisfying. Now, he need to make scheduling decision to make sure there is not many raw materials in...
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...present as your own. This is only meant as a solutions guide for you to answer the problem on your own. Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, has plans to eventually add five new chairlifts. Suppose that one lift costs $2 million, and preparing the slope and installing the lift costs another $1.3 million. The lift will allow 300 additional skiers on the slopes, but there are only 40 days a year when the extra capacity will be needed. (Assume that Deer park will sell all 300 lift tickets on those 40 days.) Running the new lift will cost $500 a day for the entire 200 days the lodge is open. Assume that the lift tickets at Deer Valley cost $55 a day. The new lift has an economic life of 20 years. Assume that the before-tax required rate of return for Deer Valley is 14%. Compute the before-tax NPV of the new lift and advise the managers of Deer Valley about whether adding the lift will be a profitable investment. Show calculations to support your answer. Assume that the after-tax required rate of return for Deer Valley is 8%, the income tax rate is 40%, and the MACRS recovery period is 10 years. Compute the after-tax NPV of the new lift and advise the managers of Deer Valley about whether adding the lift will be a profitable investment. Show calculations to support your answer. What subjective factors would affect the investment decision? Solution 1. Investment = $2,000,000 + $1,300,000 = $3,300,000 Annual cash inflow = 300 skiers x...
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...Capital Budgeting March 28, 2016 Capital Budgeting An investment project is part of a business growth initiatives, which may be s deemed acceptable or unacceptable based on the rate of the projects return. Unlike most decisions that an organization makes, a capital budgeting decision requires that two decisions a financial and an investment decision. For a business to decide which project to invest their resources, they must use one or several of the tools design for capital budgeting. Definitions, Analysis, and Interpretation Capital budgeting is used to make calculated informed decisions about acquiring property, businesses, and equipment. It is a process that allows investors to analyze, compare and select the acquisition, which will maximize their wealth. Our team had to analyze a Capital Budgeting Case Study presented in week 6 of Quantitative Reasoning for Business course. In this case, we are to choose only one corporation within the budget of $250,000. As stated in the guidelines, there is a comparison between Company A and company B. This is done by four calculations for both companies. Which are the 5-year projected income statement, a 5-year projected cash flow, net present value (NPV), and the internal rate of return (IRR). Included is the excel spreadsheet with our calculations and graph to decipher easily which company will make the best purchase. The NPV and IRR are two critical numbers that are helpful in determining the purchase. “The NPV tells us...
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