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accounting and finance for non specialists

Accounting And Finance Management For Non-Specialist 1st Edition Peter Atrill, Eddie McLaney, David Harvey, Sheridan Titman - Solutions

9.1 Project Analysis. Assume that you are evaluating the following three mutually exclusive projects:A. Complete the following analyses. (For the last two lines, Terminal Value, please write in the
7.3 DuPont analysis application. Using the DuPont analysis, discuss the comparative business approach of Tootsie Roll and ConAgra. Tootsie 1998 Roll ConAgra Net margin 17.4% 2.6% Total asset turnover
2.4 Interrelationship of the Financial Statements. The following is a consolidated balance sheet and income statement for Wal-Mart for the fiscal years ended January 31, 1998 and 1999.A. Compute the
2.2 Balance Sheet Preparation. The following items are listed in alphabetical order. Please prepare a Balance Sheet from this information and then answer the additional questions:A. What dollar
11.5 Security “sweeteners.” For each of the terms below, indicate if the term represents a sweetener for the issuer or buyer of a security. Provide a short explanation.A. Convertibility C.
11.4 Lease advantages. Hershey Foods Corporation is a high marginal taxpayer and a high creditworthy firm. Explain when it might make sense for Hershey to lease an asset. Under what conditions should
11.3 Term loan. A firm is seeking a term loan from a bank. Under what conditions would it want a fixed interest rate, and under what conditions would it want the rate to fluctuate with the prime rate?
11.2 Preferred stock. If the corporate income tax were abolished, would this raise or lower the amount of new preferred stock issued?
11.1 Venture capital. Why are convertible preferred stock and a staged capital commitment employed by venture capitalists?
10.6 Net present value and cost of capital. HT Inc. is considering a new process to speed production and reduce costs. The project will last 7 years and have an initial investment of$1,400,000. The
10.5 Cost of capital and products. How could the cost-of-capital structure influence a product's price or a product's quality?
10.4 Hurdle rates. Assume that Hershey Foods has a policy that cost savings projects must earn a 16 percent hurdle rate and that new products must earn a 25 percent hurdle rate. The hurdle rate is a
10.3 Cost of capital. A. Calculate the cost of each financing source for Keyboard, Inc. The tax rate is 40 percent:B. Currently, there are 121 million shares of common stock outstanding at $48 per
10.2 Capital asset pricing model. What is the expected return on asset X if it has a beta of 0.85, the expected market return is 11.50 percent, and the risk-free rate is 5.75 percent?
10.1 Cost of debt. An outstanding bond has a $1000 face value, a 9.5 percent annual coupon, and 10 more years until it matures.The bond currently sells for $1153. What are the historical after-tax
9.5 Incremental Cash Flow. Which of the following cash flows should be treated as incremental cash flows when computing the net present value of an investment?Year Sales Growth 2 40%3 25%4 20%5
9.4 Cash Flow Determination. Please construct the annual cash flows and calculate the net present value for a project with the following information:
9.3 Net Present Value Impact. Comment on the effects that the following would have on the net present value (i.e., increase, decrease, or no effect). Provide a short explanation of your answer. Each
9.2 Postcompletion Audit. A. Two years ago, a new product capital project was approved for $75 million based upon the cash flows listed below. Calculate the net present value for the original
8.5 Warner Flooring Corporation is attempting to determine the optimal level of current assets for the coming year. Management expects sales to increase to approximately $1.2 million as a result of
8.4 You are given the following information:Annual demand: 2800 units Cost per order placed: $5.25 Carrying cost: 20 percent Price per unit: $30 A. Fill in the blanks in the table below.B. What is
8.3 Futon Company has been reviewing its credit policies. The credit standards it has been applying have resulted in annual credit sales of $5 million. Its average collection period is 30 days, with
8.2 Walnut Industries projects that annual cash usage of $3.75 million will occur uniformly throughout the forthcoming year.Walnut plans to meet these demands for cash by periodically selling
8.1 Brown Company is short on cash and is attempting to determine whether it would be advantageous to forgo the discount on this month's purchases or to borrow funds to take advantage of the
7.2 International analysis. The following information is from Table 2.18, Heinz’s geographical information. To analyze the business, complete the table below and answer the associated
7.1 Performance metric application. Summarized below is 1998 financial information for seven actual companies in seven different industries. Please identify the companies and match the names to the
6.6 The treasurer of a company in Mexico borrowed $10,000 in dollars at a 12 percent rate when the exchange rate was 9 pesos to the dollar. His company paid the loan plus interest 1 year later, when
6.5 The Wall Street Jour nal, on October 12, 2000, listed the following information on the exchange rates between the dollar and the German mark:X0 = 2.2500 DM/$E0 = $0.4444/DM XF (90 days) = 2.2399
6.4 If the exchange rate between francs and dollars is Fr 7.546 =$1.00, and between pounds and dollars is £1 = $1.4623, what is the exchange rate between francs and pounds?
6.3 In March 1991, the U.S. dollar was worth 137 yen. In October 2000, the rate was 108 yen.A. What is X0 (1991)? What is X1 (2000)?B. What is E0 (1991)? What is E1 (2000)?C. What was the percentage
6.2 You have priced two pure discount bonds, each with 5 years to maturity and with a face value of $1000. They pay no coupons.The first bond sells for $780.58, and the second sells for$667.43.A.
6.1 Given below are the yields to maturity on a 5-year bond:A. What is the implied forward rate of interest for the third year?B. What (geometric) average annual rate of interest would you receive if
5.6 A corporation had net taxable income of $60,000 in 1991.A. How much income tax must the corporation pay?B. What is the marginal tax rate?C. What is the average tax rate?5.7 Martin Corporation had
5.5 Under what circumstances does it become advantageous for the small business to incorporate?
5.4 What are the advantages and disadvantages of the use of a sole proprietorship versus a partnership for conducting the operations of a small business firm?
5.3 Why is personal income tax information important to the study of business finance?
5.2 For tax purposes, how does the treatment of interest expense compare with the treatment of common stock dividends from each of the following standpoints: a firm paying the interest or dividend,
5.1 Which is the more relevant tax rate—the marginal or the average—in determining the form of organization for a new firm?Discuss aspects of the tax laws that make the form of organization less
4.5 You are told that the market for options is a fair game but that four out of five options expire worthless. How can these two statements be true?
4.4 Why might an investor want to sell short?
4.3 Evaluate each of the arrangements in favor of today's organized securities exchanges relative to OTC markets.
4.2 How could each tool of the Federal Reserve be used to slow down expansion?
4.1 What are the financial intermediaries, and what economic functions do they perform?
3.9 What rate of interest compounded monthly is equivalent to 18 percent compounded continuously?
3.8 If you have an account that compounds interest continuously and has an effective annual interest yield of 6.18 percent, what is the stated annual interest rate?
3.7 You wish to borrow $50,000 for a home mortgage. The quoted interest rate is 11 percent compounded monthly for a 25-year mortgage.A. What annual percentage rate is equal to 11 percent compounded
3.6 On December 31, George Smith buys a building for $175,000, paying 20 percent down and agreeing to pay the balance in 20 equal annual installments that are to include principal plus 15 percent
3.5 You have just purchased a newly issued $1000 five-year Malley Company bond at par. The bond (bond A) pays $60 in interest semiannually ($120 per year). You are also negotiating the purchase of a
3.4 You are offered two alternatives: a $2000 annuity for 7 years or a lump sum today. If current interest rates are 9 percent, how large will the lump sum have to be to make you indifferent between
3.3 If, at age 25, you open an IRA account paying 10 percent annual interest and you put $2000 in at the end of each year, what will be your balance at age 65?
3.2 At a growth rate of 9 percent, how long does it take a sum to double?
3.1 The current production target for the 5-year plan of Logo Company is to increase output by 8 percent per year. If the 2000 production is 3.81 million tons, what is the target production for 2005?
2.3 Accounting Relationships.A. The beginning balance of Net, Plant, Property, and Equipment was $250 million. During the year, capital expenditures were $75 million and depreciation expense was $45
2.1 Income Statement Preparation. The following items are listed in alphabetical order. Please prepare an Income Statement from this information and then answer the additional questions:A. What is
1.6 Opportunities created by international competition:• Larger markets for U.S. products due to globalization• Increased efficiency (including via mergers and restructuring)encouraged to compete
1.5 The choice of the industry or risk class of the firm influences both profitability opportunities and risk. When the choice of industry or risk class has been made, both profitability and risk are
1.4 Shareholders have limited liability, but receive all the returns after the fixed payments to the bondholders are made. After obtaining funds from bondholders, the shareholders may seek to make
1.3 The conflict of interest between the shareholders and managers has been referred to as the agency problem. Managers“control" the firm and may do things in their own self-interest at the expense
1.2 Profit maximization would have to be from a long-run standpoint to be meaningful at all. However, it would still be deficient in not considering the risk of alternative income streams. Wealth
1.1 The main functions of financial managers are (1) to raise funds from external financial sources, (2) to allocate funds among different uses, (3) to manage the flow of funds involved in the
1.6 What opportunities and threats are created for financial managers by increased international competition?
1.5 What is the nature of the risk-return tradeoff faced in financial decision making?
1.4 What are the potential conflicts of interest between shareholders and bondholders and how can they be resolved?
1.3 What are the issues in the conflict of interest between stockholders and managers and how can they be resolved?
1.2 Why is shareholder wealth maximization a better operating goal than profit maximization?
1.1 What are the main functions of financial managers?
In the light of the examples included in Real World 1.3, do you believe that ethics in today’s business world are improving?economic information about a reporting entity’. Explain and provide an
Do you think, from your own experience, that the ideas of stakeholder theory, as compared with the AppendixLO1
What do you understand by stewardship? Does the traditional approach to stewardship accounting AppendixLO1
Refer back to Real World 1.1. How do you feel about the idea, ‘it was legal and others were making money that way’?How might we best move away from this attitude, and what should our approach
If you were to consider starting a business, what information would you be seeking before commencing?AppendixLO1
However a business is organised, it must meet the needs or demands of various stakeholders.• What are the different types of business structure?• What is meant by the term ‘stakeholder’?•
Accounting is said to perform a ‘decision-usefulness role’ as well as an ‘accountability (stewardship)role’. Distinguish between these two roles and provide an example of each.make a decision
Which economic principle should determine which accounting information should be produced?Should economics be the only issue here? (Consider who the users of accounting information are.)AppendixLO1
In relation to recent corporate crashes, what have been the main lessons in relation to the accounting process (recording and reporting procedures)?AppendixLO1
Describe two advantages for each type of business organisation.AppendixLO1
What is meant by the ‘risk–return’ relationship? Provide a non-accounting example of the trade-off between risk and return.AppendixLO1
‘Relevance’ and ‘reliability’ represent two key qualitative characteristics of accounting information.between them. What are the similarities?AppendixLO1
How are annual budgets linked to the long-term plans of an organisation?AppendixLO1
Within a business, how can accounting facilitate control?AppendixLO1
Distinguish between ‘planning’ and ‘control’.AppendixLO1
As business changes, accounting must change. Do you agree?AppendixLO1
Distinguish between ‘accounting entities’ and ‘legal entities’ as business structures.AppendixLO1
List three reasons for starting a business. Explain which reason is most important and why.AppendixLO1
What type of accounting information is produced more frequently? Why?AppendixLO1
Why is it important to have a partnership agreement specifying the arrangement for allocating AppendixLO1
Explain why accounting information is generally considered to be useful, and why you need to know the basics of accounting.AppendixLO1
Identify ways in which business and accounting have been changing, together with some current issues confronting businesses and their associated reporting, including current thinking on ethics in
Outline the main types of business ownership, describe the way in which a business is typically organised and managed, and explain the importance of accounting in a business context AppendixLO1
Provide an overview of the main fi nancial reports prepared by a business AppendixLO1
Identify the main purpose of a business (while recognising a range of other infl uences), and explain the traditional risk–return relationship AppendixLO1
Compare and contrast fi nancial and management accounting AppendixLO1
List the main groups that use the accounting reports of a business entity, and summarise the different uses that can be made of accounting information AppendixLO1
Explain the nature and role of accounting AppendixLO1
12.1 The chief executive officer of Sparkrite Ltd, a trading business, has just received summary sets of financial statements for last year and this year:The chief financial officer has expressed
12.2 Hercules Wholesalers Ltd’s managers have been particularly concerned with the business’s liquidity position in recent months. The most up-to-date income statement and statement of financial
Hora plc holds inventories of a particular type of motor car tyre, which is ordered in batches of 1,200 units. The supply lead times and usage rates for the tyres are:The business wishes to avoid
What are the principal sources of finance that are available to you as an individual or small business?AppendixLO1
How does the ASX benefit: (a) investors? (b) corporate regulators? (c) business entrepreneurs?AppendixLO1
Venture capital: (a) What is it? (b) Which organisations seek venture capital? (c) What criterion is important to venture capitalists making investment decisions?AppendixLO1

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