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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? - Progress measurement A firm has paid off its short-term loans more quickly in the past couple of years. What might t...

cash budgeting - a plan for controlling cash inflows and outflows business to balance income with expenditures fixed expenditures - an expense that you do not have direct control over and that remains constant from period to period How do the benefits of knowing the cash position for each period differ between businesses and individuals? - Knowing the cash position allows businesses to recognize when short-term loans are needed, while it allows individuals to analyze progress toward their ...

After W&H Inc. has developed a cash budget, what should the company do in the following months? - It should monitor its actual cash flows and then revise the cash budget if needed. W&H Inc.'s labor costs each month are an example of which item in a cash budget? - Cash disbursement Why would creating a cash budget be useful for W&H if the firm needs a loan from the bank or another short-term lender? - Cash budgets increase the lender's trust in a firm by demonstrating the firm's ability ...

Company ABC would like to continue to grow, but in order to maintain control of all decisions and ownership, it wants to avoid issuing new stock. Which calculation will show the company's leadership the fastest that ABC can grow? - Sustainable growth rate How can a company reduce its discretionary financing needed (DFN)? - Increase the net margin. How can a firm grow its fixed assets if it is expecting growth but has reached capacity with its fixed assets? - Invest a substantial amount of ...

A company called Bobby's Books is considering purchasing a new bookbinding machine. The company calculates the hurdle rate of the project to be 9% and the IRR to be 11%. Should the company purchase the bookbinding machine? - Yes, because the IRR exceeds the cost of capital. A company is trying to decide which of four projects to invest in. Project 1 has an IRR of 14% and an NPV of $54,000. Project 2 has an IRR of 11% and an NPV of $67,000. Project 3 has an IRR of 9% and an NPV of $60,000....

Why is it important to consider all relevant cash flows in an ideal evaluation method for capital investment? - Without considering every cash flow of a potential project, you do not know how the project will enhance the value of a firm. Talia is comparing four mutually exclusive projects. In order to choose the best project to optimize the goal of the firm, which capital budgeting method should Talia use? - Net present value (NPV) Alphabet Co. has $50,000 to spend on capital investment pro...

A company is considering five projects that are not mutually exclusive. However, the company does not have enough money to do all of them. In order to prioritize projects that fit within the company's budget, which capital budgeting method should be used? - Profitability index (PI) A financial analyst for the company Bobby's Books has been asked to evaluate a potential investment using a method that considers the time value of money. Is there more than one way to do this? - Yes, the anal...

0 / 1 Why is it appropriate to calculate the value of a bond in the same way that the present value of an annuity is calculated? Bonds pay a coupon every six months, pay a constant coupon amount, and have a maturity date. The cash flows that come from owning a bond grow at a constant rate every year, and the payments continue forever. Even though bonds have a fixed length, the cash flows differ each year. A bond is a fixed amount paid each period forever to compensate investors. - Bonds p...

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? Assessment of future needs Performance evaluation Standardization Corrective action - Performance evaluation A company is developing a financial forecast for the next year. The company plans to implement a new factory that will increase production and resulting sales by 20%. S...

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 costs? A financial manager at a company is trying to determine weather to issue new stocks or new bonds to cover the costs of a project the company is doing the next year. Which main task in business...