Practical financial manager 4th ed william laser

Practical financial manaegment lasher 7th ed chapter 01 foundattions

Practical financial manaegment  lasher 7th ed chapter  01 foundattions
... Investments and financial markets Financial management of corporations Fields are separate but related Financial Assets Real asset—Objects that provide services: houses, cars, food, etc Financial asset—a ... limited to financial market activity – Now – Corporate finance includes the financial management of organizations Financial Management The management and control of money and money-related operations ... All finance professionals need some knowledge of accounting Level depends on job – Financial analyst needs to know LOTS of accounting – Stockbrokers not as much 16 Financial Theory—The Relationship...
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Practical financial manaegment lasher 7th ed chapter 02

Practical financial manaegment  lasher 7th ed chapter  02
... its service life Can be straight lined or accelerated Cost recorded on the income statement does not = cash spent The Nature of Financial Statements Three Financial Statements – Income statement ... reported net of reserve – Writing Off Bad Inventory Missing, damaged, or obsolete items removed from gross and reserve leaving net unchanged 16 Assets Overstatements – If assets are overstated, ... partially financed with debt is leveraged Fixed Financial Charges – Interest must be paid regardless of profitability 26 Concept Connection Example 2-3 Leverage A business is financed with equity...
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Practical financial manaegment lasher 7th ed chapter 03

Practical financial manaegment  lasher 7th ed chapter  03
... Sources of Financial Information Annual Report – Management's report card to stockholders on own performance – The primary source of financial information – Required of publicly traded companies ... Line – Credit reports – Must be audited – GAAP Orientation of Financial Analysts Critical and investigative Looking for current or potential problems Looking for the physical reasons behind financial ... depreciation Cash coverage = interest 39 FIXED CHARGE COVERAGE A variation on TIE to include lease payments as fixed financial charges equivalent to interest Fixed charge coverage = EBIT + lease payments...
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Practical financial manaegment lasher 7th ed chapter 04

Practical financial manaegment  lasher 7th ed chapter  04
... Firms 15 Financial Plan as a Component of a Business Plan Financial plan is the financial portion of the business plan – A set of pro forma financial statements projected over a time period – Financials ... Procedural Approach – Financial plans are built line-by-line beginning with revenues Debt/Interest Planning Problem – The next items needed are interest expense and debt – Planned debt is required ... factory capacity, so no new fixed assets beyond normal replacements will be needed to support the growth This year’s income statement and ending balance sheet are estimated as follows: 27 Example...
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Practical financial manaegment lasher 7th ed chapter 05

Practical financial manaegment  lasher 7th ed chapter  05
... procedures under which businesses are organized and run – Focused on ethics and legality of financial relationships between top managers and the corporations they serve – The idea is connected ... and stockholders Two major financial crises thus far in the 21st century – Stock market crash of 2000 caused by financial reporting fraud – Financial crisis of 2008 caused by the subprime mortgage ... staggering losses and equity reductions by financial institutions Bailouts arrived Federal Government Actions in 2008 Intervention – Government takeover – Officials brokered merger of at risk institutions...
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Practical financial manaegment lasher 7th ed chapter 06

Practical financial manaegment  lasher 7th ed chapter  06
... If PV is entered as positive the computed FV is negative 12 Financial Calculators Basic Calculator functions Financial Calculators What is the present value of $5,000 to be received in one year ... largest financial transaction in a person’s life – Mortgages are typically amortized loans, compounded monthly over 30 years Early years most of payment is interest Later on principal is reduced quickly ... interest, 14% compounded semiannually and pay Shipson the present value of the annuity of the expected payments How much should Shipson receive? Solution: 43 Amortized Loans An amortized loan’s principal...
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Practical financial manaegment lasher 7th ed chapter 07

Practical financial manaegment  lasher 7th ed chapter  07
... the cash flows expected from owning it In bonds, the expected cash flows are predictable – – Interest payments are fixed, occurring at regular intervals Principal is returned along with the last ... may be in financial trouble Buying the bond is very risky In theory riskier loans should be discounted at higher rates leading to lower calculated prices 37 Convertible Bonds Unsecured bonds exchangeable ... Harry exercised the conversion feature today and immediately sold the stock he received Calculate the total return on his investment b What would Harry’s return have been if he had invested $1,000...
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Practical financial manaegment lasher 7th ed chapter 08

Practical financial manaegment  lasher 7th ed chapter  08
... Stock valuation models give estimated results since the inputs are approximations of reality Actual growth rate can be VERY different from predicted growth rates 27 Practical Limitations of Pricing ... (the holder) the right to buy stock at a fixed price (the exercise or strike price) for a specified time period – Once expired, it can’t be exercised – Option price < price of the underlying ... Recast Gordon model to focus on the return (k) implied by the constant growth assumption D1 k= +g P0 The expected return reflects investors’ knowledge of a company If we know D0 (most recent dividend...
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Practical financial management lasher 7th ed chapter 09

Practical financial management  lasher 7th ed chapter  09
... The Expected Return The expected return on stock is the return investors feel is most likely to occur based on current information – Anticipated return based on the dividends expected as well ... equal to their required return for that stock – – CAPM attempts to quantify how required returns are determined The stock’s value (price) is estimated based on CAPM’s required return for that stock ... “Diversified Away” in a well-diversified portfolio – – Portfolio Theory assumes it is gone 38 Diversifying to Reduce Market (Systematic) Risk Market risk is caused by events that affect all stocks – Reduced...
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Practical financial management lasher 7th ed chapter 010

Practical financial management  lasher 7th ed chapter  010
... Long-Lived Project has the higher EAA, it should be chosen This is the same decision reached by the Replacement Chain Method 37 Capital Rationing Used when capital funds for new projects are limited ... acquired with it are both called capital Capital Budgeting Planning and Justifying How Capital Dollars Are Spent On Long Term Projects Provides methods for evaluating whether projects make financial ... Budgeting A major part of the financial management of the firm Kinds Of Spending In Business Short term - to support day to day operations Long term - to support long lived equipment and projects...
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Practical financial management lasher 7th ed chapter 011

Practical financial management  lasher 7th ed chapter  011
... new assets when needed Include working capital Depreciation: Plan depreciation for new and old assets A non-cash item but it impacts taxes Taxes and Earnings Summarize tax deductible items in ... Last year purchased a gearshift design for $50,000 Facilities are at capacity, so a new shop is required Company owns land nearby New building will cost $60,000 Land purchased 10 years ago for ... forecasted to grow for years before leveling off We’ll estimate for years—for a longer forecast repeat the last year as The building is depreciated over 39 years while the equipment is depreciated...
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Practical financial management lasher 7th ed chapter 012

Practical financial management  lasher 7th ed chapter  012
... different from expected is related to the variance or standard deviation Figure 12-2 Risk in Estimated Cash Flows The Importance of Risk in Capital Budgeting Until now we have viewed cash flows as ... budgeting – Generally increases a project's expected NPV 25 The Abandonment Option A poorly performing project can sometimes be abandoned – Usually by redeploying project resources to another use Avoids ... For IRR – k is used as the discount rate – Compare IRR to k A higher k leads to lower NPV reducing the chance of project acceptance A higher k leads to a lower chance that IRR>k reducing probability...
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