Lanari

A company calculated variances of a budget and actual cash flows that indicate the firm's strengths and weaknesses in cash flows and its budgeting process. Which major use of cash budgeting is this an example of? - Performance evaluation A company currently has a ratio of 1.5 but hopes to improve the ratio to 2 to align more with the industry benchmark. To achieve this goal, costs were cut in production through an investment in efficient equipment, and the company achieved a higher profit ...

Time Value of Money - * Idea that money is worth more today than same amount in future * Considers amount of cash flows at different times with certain interest rate * Language of finance TVM Variables - * Amount of cash flows * Timing of cash flows * Rate at which cash flow value changes due to passage of time Present Value - * Represents value of cash today * Relative to other cash flows Future Value - * Represents value of cash at a future point in time * Relative to other cash flows...

What is the difference between the current ratio and the quick ratio? - Inventory is excluded in the calculation of the quick ratio. What is the term for the risk that changes in interest rates will impact the value of a bond? - Interest rate risk What is used to measure total risk? - Standard deviation What is the term for the return over the entire period that an investor owns a financial security? - Holding period return You signed an apartment contract today. You are going to pay $1...

1 - PI's break-even point. If the PI is 1.15, then the project generates 15% more in the present value of cash inflow than the initial investment. One the other hand, if PI is .90, the project generates cash inflows that are 10% short of the initial investment. You should accept a project with a PI greater than 1 and you should reject a project with a PI less than 1 3 Key uses of the cash budget - indicating future financing needs, providing a basis for corrective action, and providing th...

1What are the purposes of financial markets? - To provide liquidity and determine prices A company is trying to finance a project with a mortgage loan from a bank. The company's assessment of the project indicates that the company may experience several years of loss until the project becomes profitable. This means that the company might lose its ability to pay back the loan and the interest on the mortgage. What action might the bank take to protect its interest? - Set a strict covenant t...

A potential project to expand the size of an apartment complex will cost $100,000. Its calculated net present value is $5,000. Given this information, which statement is correct? - The project should be accepted because it has a positive NPV. The YTM of a bond went from 8% to 7%. What can be predicted about the price of the bond? - It will increase. 0 / 1 The company Betsy's Wigs is considering three potential projects that are not mutually exclusive. The IRR, NPV, and PI for each projec...

A company currently has a ratio of 1.5 but hopes to improve the ratio to 2 to align more with the industry benchmark. To achieve this goal, costs were cut in production through an investment in efficient equipment, and the company achieved a higher profit margin. If this continues, you are certain that the firm will achieve its goal in two years. What is this an example of? a) Flexibility b) Trend analysis c) Cross-sectional analysis d) Progress measurement - d) Progress measurement You ...

A local start-up company just hit its five-year anniversary and is planning an initial public offering sometime this year. In order to issue public stock, which market will the company use? - Primary market About a year ago, the short-term Treasury bill had 1.54% interest and the long-term Treasury note had 2.54% interest. This week, the 1-year Treasury bill has an interest rate of 3.13%, while the 10-year Treasury note has an interest rate of 2.28%. What does this information indicate abou...

In which way is accounting different from finance? - Accounting is backward looking, while finance is focused on the future. What is the main question that both individuals and companies must consider when making financial decisions to reach a goal? - Will the benefits of the action outweigh the cost? A financial manager at a company is trying to determine whether to issue new stocks or new bonds to cover the costs of a project the company is doing the next year. - Making Financing Decision...

Unit 2 (Module 1) What area of finance involves deciding which assets to invest in to create wealth in the future? - Unit 2 Investments (Investments are an area of finance that involves deciding which assets to invest in to create wealth in the future.) Hannah is the financial manager of a firm. A project that she has recommended has been approved and will cost $5 million. Since the company does not have enough cash on reserve, Hannah must figure out how to raise enough money to start t...