FIN 300 Lecture Notes - Lecture 10: Interest, Fairy, Kelantan-Pattani Malay

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tanworm342

6 Jun 2016

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Total asset turnover (tat) = 1) sales/assets or 2) 1/cir. Cash ratio = (cash + cash equivalents) / current liabilities. Goal of the firm, agency problems and costs. Goal of the firm, in the long-term, is to maximize shareholder value (current stock price); not maximize profits, market share, etc the goal is to maximize shareholder value (current share price) If 2008 base year and inventory is ; 2009 inventory is . 2008 is base year, inventory relative to base year = 422/393 = 1. 07 . Managers are agents of the firm, acting on the shareholders" behalf. Agency problem = conflict between managers and shareholders. E. g. , if manager compensation is based on # of stores opened, then this is an agency problem since managers will just open as many stores as possible even though it might hurt the stock price. Agency cost: 1) expenses that benefit managers but not shareholders (perks, corporate jet, etc.

Related Questions

Hello, I am having trouble with m finance homework. I have listened to all of he online lectures and I am still not sure what to do. Below I have attchaed my homework asssignment, hoping you could help me with some of it. Thanks in advance!

1. (6 points possible) The value of a firm equals current (present) value of expected (future) cash flows based on the return demanded by investors which is dependent on the risk associated with the firm. Give some firm factors/considerations that impact net cash flows and some investor factors/considerations that impact rate of return. 2. (6 points possible) The Chief Financial Officerâs (CFO) key subordinates are the Treasurer and the Controller. Compare and contrast their roles. 3. (6 points possible) Define the âagency relationshipâ and the âagency problemâ. Give some possible mechanisms used by large corporations to motivate managers to act in the shareholdersâ best interest. 4. (6 points possible) Identify three major forms of business organization in the United States and give two advantages and two disadvantages of each. 5. (6 points possible) Discuss some potential problems associated with financial statement analysis. 6. (6 points possible) Explain the DuPont Identity as it relates to Volume, Margin and Leverage and Shareholder Return. 7. (6 points possible) Explain the difference between net income, or accounting profit and net cash flow. Why do these numbers generally differ? 8. (9 points possible) Billingsworth Company had earnings per share of $4 last year and it paid a $2 dividend. Total retained earnings increased by $12 million during the year, and the book value per share at year-end was $40. Billingsworth has no preferred stock, and no new common stock was issued during the year. If the companyâs year-end debt (which equals its total liabilities) was $120 million, what was its year-end debt/assets ratio? 9. (9 points possible) Complete the balance sheet and sales information in the table that follows for Iceberg Industries using the following financial data: Debt ratio: 50% Quick ratio: .80x Total assets turnover: 1.5x Days sales outstanding: 36.0 days Gross profit margin on sales: (Sales â Cost of goods sold)/Sales = 25% Inventory turnover ratio: 5.0x Balance Sheet: Cash ________________ Accounts payable _______________ Account receivable ________________ Long-term debt $60,000 Inventories ________________ Common stock ______________ Fixed Assets ________________ Retained earnings $97,500 Total Assets $300,000 Total liabilities and equity ______________ Sales ________________ Cost of goods sold ___

FIN 300 Lecture Notes - Lecture 10: Interest, Fairy, Kelantan-Pattani Malay

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