...Managerial Financial 3-1: Greene Sisters has a DSO of 20 days. The company’s average daily sales are $20,000. What is the level of its accounts receivable? Assume there are 365 days in a year. Answer: Days Sales Outstanding = Receivables / Average Sales per day or Receivables / (Annual Sales/365) DSO 20 = Receivables / 20000 Receivables = DSO x Average daily sales = 20 x $20,000 Receivables = $400,000 3-2: Vigo Vacations has an equity multiplier of 2.5. The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debt ratio? Answer: Equity Multiplier (EM) = 2.5 Equity Ratio = 1/ EM Equity Ratio = 1/2.5 = 0.40 Debt Ratio + Equity Ratio = 1 Debt Ratio = 1 - Equity Ratio = 1 - 0.40 = 0.60 or 60% 3-3: Winston Washers’s stock price is $75 per share. Winston has $10 billion in total as- sets. Its balance sheet shows $1 billion in current liabilities, $3 billion in long-term debt, and $6 billion in common equity. It has 800 million shares of common stock outstanding. What is Winston’s market/book ratio? Answer: Book value per share = Common equity/shares outstanding ($6,000,000,000/800,000,000) = $7.5 Market/book ratio = market price per share/book value per share ($75/$7.5) = 10 3-4: A company has an EPS of $1.50, a cash flow per share of $3.00, and a price/cash flow ratio of 8.0. What is its P/E ratio? Answer: Price/Cash flow ratio = Price per share (PPS) / Cash flow per share 8...
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...Principles of Managerial Finance Solution Lawrence J. Gitman PART 1 Introduction to Managerial Finance CHAPTERS IN THIS PART 1 2 3 The Role and Environment of Managerial Finance Financial Statements and Analysis Cash Flow and Financial Planning INTEGRATIVE CASE 1: TRACK SOFTWARE, INC. CHAPTER 1 The Role and Environment of Managerial Finance INSTRUCTOR’S RESOURCES Overview This chapter introduces the student to the field of finance and explores career opportunities in both financial services and managerial finance. The three basic legal forms of business organization (sole proprietorship, partnership, and corporation) and their strengths and weaknesses are described, as well as the relationship between major parties in a corporation. The managerial finance function is defined and differentiated from economics and accounting. The chapter then summarizes the three key activities of the financial manager: financial analysis and planning, investment decisions, and financing decisions. A discussion of the financial manager's goals – maximizing shareholder wealth and preserving stakeholder wealth – and the role of ethics in meeting these goals is presented. The chapter includes discussion of the agency problem – the conflict that exists between managers and owners in a large corporation. Money and capital markets and their major components are introduced in this chapter. The final section covers a discussion of the impact of taxation on the firm's financial...
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...taxation, social security, low-income assistance. High Financing and Managing Government Covers cost-benefit evaluations which influence decision making. Role of public policy in affecting the efficiency of markets and the distribution of resources in society. High. Economic Analysis of Law Teaches students how to think as an economist about legal rules and evaluate alternative legal rules. Interpretation of legal rules Moderate Behavioural Economics, Markets, and Public Policy Applies insights from psychology to the study of economic phenomena and decision making. How psychology plays out in markets, where consumers and firms interact and compete. Moderate Managerial Economics The application of microeconomic theory to management problems To understand economics in order toanalyse private and public management problems in an economic framework High Risk Analysis and Environmental Management introduce students to the complexities of making decisions about threats to human health and the...
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...Version 2 | | |Finance for Decision Making | Copyright © 2010, 2009, 2006 by University of Phoenix. All rights reserved. Course Description This course addresses advanced principles in financial management and decision making. Emphasis is placed on providing relevant theory, best practices, and skills to effectively manage risk, time value of money, working capital, capital structure, the regulatory environment, and evolving issues in financial management. Policies Faculty and students/learners will be held responsible for understanding and adhering to all policies contained within the following two documents: • University policies: You must be logged into the student website to view this document. • Instructor policies: This document is posted in the Course Materials forum. University policies are subject to change. Be sure to read the policies at the beginning of each class. Policies may be slightly different depending on the modality in which you attend class. If you have recently changed modalities, read the policies governing your current class modality. Course Materials Gitman, L. J. (2009). Principles of managerial finance (12th ed.). Boston, MA: Pearson Addison Wesley. All electronic materials are available on the student website. |Week One: Financial Risk Management...
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... *CETE-Centro de Estudos de Economia Industrial, do Trabalho e da Empresa, Faculdade de Economia, Universidade do Porto, Portugal. Correspondence to: Jorge Farinha, Faculdade de Economia da Universidade do Porto, Rua Roberto Frias, 4200 Porto, Portugal. Tel. (351)-22-5571100, Fax (351)-22-5505050. E-mail: jfarinha@fep.up.pt. CORPORATE GOVERNANCE: A SURVEY OF THE LITERATURE ABSTRACT This paper reviews the theoretical and empirical literature on the nature and consequences of the corporate governance problem, providing some guidance on the major points of consensus and dissent among researchers on this issue. Also analysed is the effectiveness of a set of external and internal disciplining mechanisms in providing a solution for the corporate governance problem. Apart from this, particular emphases are given to the special conflicts arising from the relationship between managers and shareholders in companies with large ownership diffusion, the issue of managerial entrenchment and the link between firm value and corporate governance. Keywords: agency theory, corporate governance, ownership structure JEL Classification: G300 1 1 Introduction Recent financial scandals associated to accounting and other frauds allegedly blamed to top company managers (e.g. Enron, Worldcom, Adelphia) have brought into public light the recurring question of whether companies are managed on the best interests of shareholders and other company stakeholders such as workers, creditors...
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...FIN 320 Entire Course (UOP Course) For more course tutorials visit www.tutorialrank.com FIN 320 Week 1 Individual Assignment Ethics Article Analysis FIN 320 Week 1 DQ 1 FIN 320 Week 1 DQ 2 FIN 320 Week 2 Assignments from the Readings FIN 320 Week 2 Team Assignment Financial Performance Case Study FIN 320 Week 2 DQ 1 FIN 320 Week 2 DQ 2 FIN 320 Week 3 Assignments from the Readings FIN 320 Week 3 Individual Assignment Working Capital Management Paper FIN 320 Week 3 DQ 1 FIN 320 Week 3 DQ 2 FIN 320 Week 4 Team Assignment Working Capital Case Study FIN 320 Week 4 Individual Assignments from the Readings FIN 320 Week 4 Individual Assignment Utilizing the TVM Simulation Summary FIN 320 Week 4 Team Assignment Cost of Capital Memo FIN 320 Week 4 DQ 1 FIN 320 Week 4 DQ 2 FIN 320 Week 5 Individual Assignment International Risk Paper FIN 320 Week 5 Individual Assignment Financial Intermediaries Paper FIN 320 Week 5 Team Assignment Capital Investment Decisions Case Study and Presentation FIN 320 Week 5 DQ 1 FIN 320 Week 5 DQ 2 ________________________________________________ FIN 320 Week 1 Individual Assignment Ethics Article Analysis (UOP Course) For more course tutorials visit www.tutorialrank.com Locate an article regarding ethics considerations in financial management. Write a 350- to 700-word article analysis in which you address the following items: • Discuss how ethics affects the financial decision-making process. • Explain...
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...71–92 Executive Compensation as an Agency Problem Lucian Arye Bebchuk and Jesse M. Fried E xecutive compensation has long attracted a great deal of attention from financial economists. Indeed, the increase in academic papers on the subject of CEO compensation during the 1990s seems to have outpaced even the remarkable increase in CEO pay itself during this period (Murphy, 1999). Much research has focused on how executive compensation schemes can help alleviate the agency problem in publicly traded companies. To understand adequately the landscape of executive compensation, however, one must recognize that the design of compensation arrangements is also partly a product of this same agency problem. Alternative Approaches to Executive Compensation Our focus in this paper is on publicly traded companies without a controlling shareholder. When ownership and management are separated in this way, managers might have substantial power. This recognition goes back, of course, to Berle and Means (1932, p. 139) who observed that top corporate executives, “while in office, have almost complete discretion in management.” Since Jensen and Meckling (1976), the problem of managerial power and discretion has been analyzed in modern finance as an “agency problem.” Managers may use their discretion to benefit themselves personally in a variety y Lucian Arye Bebchuk is the William J. Friedman Professor of Law, Economics and Finance, Harvard Law School, and Research Associate...
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...Principles of Managerial Finance The Prentice Hall Series in Finance Adelman/Marks Entrepreneurial Finance Andersen Global Derivatives: A Strategic Risk Management Perspective Bekaert/Hodrick International Financial Management Berk/DeMarzo Corporate Finance* Berk/DeMarzo Corporate Finance: The Core* Berk/DeMarzo/Harford Fundamentals of Corporate Finance* Boakes Reading and Understanding the Financial Times Brooks Financial Management: Core Concepts* Copeland/Weston/Shastri Financial Theory and Corporate Policy Dorfman/Cather Introduction to Risk Management and Insurance Eiteman/Stonehill/Moffett Multinational Business Finance Fabozzi Bond Markets: Analysis and Strategies Fabozzi/Modigliani Capital Markets: Institutions and Instruments Fabozzi/Modigliani/Jones/Ferri Foundations of Financial Markets and Institutions Finkler Financial Management for Public, Health, and Not-for-Profit Organizations Frasca Personal Finance Gitman/Joehnk/Smart Fundamentals of Investing* Gitman/Zutter Principles of Managerial Finance* * denotes Gitman/Zutter Principles of Managerial Finance— Brief Edition* Goldsmith Consumer Economics: Issues and Behaviors Haugen The Inefficient Stock Market: What Pays Off and Why Haugen The New Finance: Overreaction, Complexity, and Uniqueness Holden Excel Modeling and Estimation in Corporate Finance Holden Excel Modeling and Estimation in Investments Hughes/MacDonald International Banking:...
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...Principles of Managerial Finance The Prentice Hall Series in Finance Adelman/Marks Entrepreneurial Finance Andersen Global Derivatives: A Strategic Risk Management Perspective Bekaert/Hodrick International Financial Management Berk/DeMarzo Corporate Finance* Berk/DeMarzo Corporate Finance: The Core* Berk/DeMarzo/Harford Fundamentals of Corporate Finance* Boakes Reading and Understanding the Financial Times Brooks Financial Management: Core Concepts* Copeland/Weston/Shastri Financial Theory and Corporate Policy Dorfman/Cather Introduction to Risk Management and Insurance Eiteman/Stonehill/Moffett Multinational Business Finance Fabozzi Bond Markets: Analysis and Strategies Fabozzi/Modigliani Capital Markets: Institutions and Instruments Fabozzi/Modigliani/Jones/Ferri Foundations of Financial Markets and Institutions Finkler Financial Management for Public, Health, and Not-for-Profit Organizations Frasca Personal Finance Gitman/Joehnk/Smart Fundamentals of Investing* Gitman/Zutter Principles of Managerial Finance* * denotes Gitman/Zutter Principles of Managerial Finance— Brief Edition* Goldsmith Consumer Economics: Issues and Behaviors Haugen The Inefficient Stock Market: What Pays Off and Why Haugen The New Finance: Overreaction, Complexity, and Uniqueness Holden Excel Modeling and Estimation in Corporate Finance Holden Excel Modeling and Estimation in Investments Hughes/MacDonald International Banking:...
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...Financial Management Challenges David Meszler BUS 650 Managerial Finance Prof. Kevin Kuznia July 29, 2013 To understand the challenges that face a financial manager today it is important to understand the general characteristics of market structures and the impact of market liquidity, competitiveness, and efficiency on financial managers. Clarifying market structures will show the basic constructs that financial managers work under. With the basic understanding of market structures and how they influence financial managers or how financial managers influence their given market structures we will identify two problems that are faced in current markets chosen from two Proquest articles, the first problem discussed will be communication issues and we will follow that up with a larger issue, the global economic recession. In discussing these issues we will also hit on how managers can possibly address those issues according to those articles. Market structures are fundamental in understanding how the economy works and how goods and/or services are exchanged. There are four basic market structures; perfect competition, monopolistic competition, oligopoly, and monopoly. Perfect competition is when there are numerous sellers with no difference in the product, no cost to enter or exit the market, and there is no influence on price. The most common type of market structure is a monopolistic competition market. In this type of market there are numerous sellers with little...
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...MASTERS IN BUSINESS ADMINISTRATION MAY/2015 BMMF5103 MANAGERIAL FINANCE Q1: The role of a financial manager requires both an understanding of how the business functions as a whole and specialized financial knowledge. The head of the financial operations is called the chief financial officer (CFO). Financial managers develop strategies that will implement the long-term goals of a corporation. Their main goal is to maximize the value of stock shares. Stockholder wealth maximization is the appropriate goal for management decisions. The risk and timing associated with expected earnings per share and cash flows are considered in order to maximize the price of the firm’s common stock. Maximizing shareholder wealth is maximizing purchasing power or maximizing the flow of discounted cash flow to shareholders over a long term period. This is because under wealth maximization, more importance is given to cash flows rather than profitability. A basic principle is that ultimately wealth maximization should be discovered in increased net worth or value of business. So, to measure the same, value of business is said to be a function of two factors – earnings per share and capitalization rate. For a business, it is not necessary that profit maximization should be the only objective; it may concentrate on various other aspects like increasing sales, capturing more market share etc, which will take care of profitability. Some factors in profit comparison does...
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...1.- Problem statement and motivation How do Financial Markets participants make decisions? How do these decisions affect the financial markets? With the financial markets in Asia being the largest in the world, such an interesting environment with participants displaying different levels of capitalism, financial market experience and knowledge, Asia is definitely a fertile ground for the study od behavioral finance. According to conventional financial theory, the world and its participants are, for the most part, rational "wealth maximizers". However, there are many instances where emotion and psychology influence our decisions, causing us to behave in unpredictable or irrational ways. Asians in general suffer from cognitive biases, more so than Westerners, often being viewed as ‘Gamblers. Behavioral finance is a relatively new field that seeks to combine behavioral and cognitive psychological theory with conventional economics and finance to provide explanations for why people make irrational financial decisions .It calls for investigation into higher mental processes, memory, perception, problem solving and thinking .This paper looks at some of the anomalies (i.e., irregularities) that conventional financial theories have failed to explain. In addition, review underlying reasons and biases that cause some people to behave irrationally. 2.- Brief survey of the literature The following areas of research have been covered, from the mid 1980’s to the main focus of the article(special...
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...mixed. Several authors have found significant relationship while others have not found any significant relationships. In Indian context also, there are several studies which propagates to have both kind of results. The way literature is linking the owner ship with performance has always been via addressing the agency (outsiders and insiders) problem, board structure, size, leverage etc. but, literature is sparse to identify these variables as moderating the relationship between ownership and firm performance. The purpose of this study is to establish and study the relationship between ownership and performance in Indian context. Considering following points, I recommend a framework to study the changing ownership and firm performance under the premise that agency costs and information asymmetry acts as moderating variable, which increases/decreases performance when ownership changes. * In India, it is confirmed by several authors that concentrated and complex ownership structure is found which creates problem of heterogeneity and opacity. * India has agency type 2 problems; few studies are available addressing type 2 problem and variables to measure this. * Opacity and complexity creates Information asymmetry and tunneling respectively between different agents and thus have implications upon firm performance. * Agency costs (type 2) also affects firm performance. Changes in Ownership Structure (Complex and concentrated) Changes in Ownership Structure ...
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...the stockholders’ agents. The problem is to get between shareholders and managers since they have different objectives. Shareholders’ goals are maximizing firms’ value, managers’ goals are benefit themselves, thus the conflicts rise in the company. In this report through concept of agency costs and analysis that two questions will be discussed. First, to what extent that as a result of agency costs shareholders wealth will not be maximized by corporate management. I will talk the agency costs in the conflict of interest between shareholders and management through analysis and lots of examples. Second I will discuss the actions that shareholders take to reduce the agency costs, and achieve their wealth maximizing. According to Hickman (1996), there are always separation of ownership and management in large businesses. Major corporations may have a large number of shareholder, these shareholders have no way to be actively involved in management so that they hire professional managers to manage the corporations. Shareholders put their money in corporations because they hope that the value of their investment will grow, they want to increase their wealth as much as possible. So the relationship in corporations is that shareholders are owners or principals and management are agents. The managers’ job is to maximize shareholders’ wealth, but managers may think their own wealth rather than the shareholders’ wealth, this is the agency problem. For example managers...
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...Abstract This paper studies the effect of managerial ownership on performance and the determinants of managerial ownership for small and medium-sized private companies. We use a panel of around 1300 firms in the German business-related service sector for the years 1997-2000. Managerial ownership up to around 80 per cent has a positive impact on firm performance (incentive effect); for higher shares the effect becomes negative (entrenchment effect). Moreover, risk-aversion of managers and signalling of f rm quality leads to a non- linear i relationship between managerial ownership and the risk exposure of a firm. The determinants of performance and ownership are estimated simultaneously. JEL Classification: G32; C23 Keywords: corporate governance, managerial ownership, firm performance, small and medium-sized enterprises. This paper was produced as part of the Centre’s Labour Markets Programme Acknowledgements We thank Bernd Fitzenberger, Steve Nickell and Marcia Schafgans for helpful discussions and Irene Bertschek, Dirk Czarnitzki, Ulrich Kaiser and Joachim Winter for useful comments. All remaining errors are our own. Elisabeth Mueller is a member of the Centre for Economic Performance, London School of Economics. Contact: E.Mueller@lse.ac.uk. Alexandra Spitz is a member of the Centre for European Economic Research (ZEW), Research Group Information and Communication Technologies, PO Box 103443, 68034 Mannheim, Germany. Contact: spitz@zew.de Published by Centre for Economic...
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