A firm’s value depends on the positive net income generated in the past. True False A firm’s value depends on the firm’s ability to generate positive cash flows now and in the future True False When determining the value of a firm, which of the following statements is true? • Inversters are risk neutral. Other things equal they prefer to pay more stocks that are less risky and have uncertain cash flows • Investers love risk. Other things equal they prefer to pay more for stocks that are more risky and have uncertain cash flows.
Which of the following is a way the SEC protects investors? (Select the best answer.) (Points : 1) Answer: Requiring companies to disclose financial information 11. Which of the following is an example of an investment commodity? (Select the best answer.)
Think of a real or made up but realistic example of a speculative risk that you or someone you know may face, and then answer the questions below. a. Describe the specific risk. investing in something to make money b. What sort of negative outcomes are possible for this type of risk?
We denote the probability of solvency Pr(S) by p > 1/2 and the probability of default Pr(F) by 1– p. In addition, the bank can conduct a special audit leading to a forecast f or s. The forecast reflects the true state with precision Pr(s|S) = Pr(f|F) = q. (a) What is the overall probability that the auditor will forecast a failure? (b) What is the probability that a bank is solvent, but the auditor forecasts a failure? (A better wording is "What is the probability that the auditor forecasts failure when the bank is solvent?") (c) What is the probability that after an auditor's forecasts of a failure, the bank turns out to be solvent?
The higher the ratio the more assurance exists that the retirement of current liabilities can be made. The current ratio measures the margin of safety available to cover any possible shrinkage in the value of current assets. Normally a ratio of 2 to 1 (2.0) or better is considered good. Short-term creditors prefer a high current ratio since it reduces their risk. Shareholders may prefer a lower current ratio so that more of the firm's assets are working to grow the business.
Banc One Corp: Asset and Liability Management; HBS 294079 1. If Banc One wanted to manage its interest rate risk without using interest rate swaps, what could it do? Specifically, could it move from being asset-sensitive to neutral or even mildly-liability sensitive without using interest rate swaps? What are the pros and cons of using interest rate swaps versus other means of addressing the bank’s interest rate sensitivity? What impact does these interest rate swaps have on the bank’s interest rate sensitivity, liquidity, accounting ratios and capital ratios?
Their objectives are often huge which requires a lump-sum to be invested. The older people choose this security also because it gives fixed income which is guaranteed, there is minimal risk and less management needed. 8) What is laddering GICs? Pros and cons? Ans): Laddering GIC(s) is a proven method of investing (also known as a laddering strategy) it can help you reduce the risk of interest rate fluctuations and increase your portfolio's overall return.
CAGR: Operating income, % Operating income (EBIT) measures a company's earning power from ongoing operations and it largely used by investor because it excludes the effects of different capital structures and tax rates used in different companies. EBIT is "capital structure neutral" and is therefore a more appropriate way of comparing the earnings of different companies than net income
Two disadvantages to automation are that it costs more and it is not easily changed. 6. A products margin is determined by subtracting its manufacturing cots (labor and material) from its price. Logically, higher prices and lower labor and material costs result in higher margins. Keeping in mind the customer buying criteria, how would you increase margins for a low end product?
Can the firm repay its loan within a reasonable period? 3. What are the key driver assumptions of the firm’s future financial performance? What are the managerial implications of those key drivers? That is, what aspects of the firm’s activities should Koh focus on especially?