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Financial Management Exam 1 Questions And Answers Latest Update
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Financial Management Exam 1 Questions And Answers Latest Update
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Financial Management Exam 1 Questions AndAnswers Latest Update
Goal of financial management - correct answers maximize stock price, maximize shareholder wealth
agency problems - correct answers managers are supposed to act as agents on behalf of shareholders but own < 100%
of the outstanding common stock
what makes managers act in shareholders best interest? - correct answers possibility of promotion
threat of being fired
threat of hostile takeover
SEC rule change - correct answers exec. pay reporting must be clearer and more comprehensive
corporate responsibility relation to value maximization - correct answers socially responsible actions can be costly but
still enhance firm value
financial market - correct answers mechanism for bringing borrowers and lenders together
money market - correct answers short term debt securities
capital market - correct answers equity (stock) and longer term debt securities
primary market - correct answers original sale of securities by govt and corp.
secondary market - correct answers sales of securities after initial issue
balance sheet - correct answers assets: liabilities+owners equity
, liquidity - correct answers ability of asset to be quickly converted to cash with little or no loss of value
liquidity trade off - correct answers liquid assets reduce probability of financial distress but yield smaller returns
financial decision of fixed assets - correct answers capital budgeting decision
financial decision of current assets and current liabilities - correct answers working capital decision
financial decision of debt and equity - correct answers capital structure decision, dividend policy/pay out decision
do we want to look at market or book value? - correct answers market
Dividend payout ratio - correct answers dividends paid/ net income
retention ratio/ plowback ratio - correct answers 1-DPR, % of net income that is retained
earnings per share - correct answers net income/ shares outstanding
dividends per share - correct answers dividends paid/ shares outstanding
EBIT - correct answers earnings before interest and taxes, equals operating income
EBITDA - correct answers earnings before interest and taxes and depreciation expense
EBT - correct answers earnings before interest and taxes - interest expense
NOPAT - correct answers EBIT-taxes : EBIAT
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