Questions and Answers of Finance Applications And Theory

What is a LLC? What are its advantages and disadvantages?
Through its alliance with Best Buy, Microsoft is selling its products—including Microsoft Network (MSN) Internet access services and handheld devices, such as digital telephones, handheld
In an era in which rapid changes in technologies are reshaping the long-standing business models of most companies, senior managers find themselves having to gaze into the future to anticipate rather
Consumer product giant Proctor & Gamble (P&G) agreed to sell its portfolio of 43 beauty brands to beauty products maker Coty Inc. (Coty) for $12.5 billion on July 8, 2015. Included in the deal are
To paraphrase the American humorist Mark Twain, reports of the coal industry’s death have been greatly exaggerated. The coal industry is clearly in decline but appears to be far from dead.
Actions required to gain regulatory approval usually involve selling off some portion of the combined business in countries where increased concentration is a concern. In doing so, the economics of
The United States went into recession in December 2007 and did not emerge until June 2009 according to the National Bureau of Economic Research, the widely recognized organization that defines such
Life Technologies Corporation (Life Tech) and Thermo Fisher Scientific Inc. (Thermo Fisher) was completed on January 14, 2014. Thermo Fisher is the largest provider by market value of analytical
No successful business strategy can remain static. Significant and sustained changes in a firm’s external environment will ensure that efforts to “stay the course” will result eventually in
Give examples of the types of actions that may be required by the parties to a proposed merger subject to an FTC consent decree.
For years, AT&T had been flirting with the idea of acquiring satellite pay TV company DirecTV.But such a deal would have resulted in increased market concentration that may have precluded getting
In response to Microsoft’s efforts to acquire the firm, the Yahoo! board adopted a “change-in-control” compensation plan. The plan stated that if a Yahoo! employee’s job is terminated by
Things looked good for Mylan NV, a leading generic pharmaceutical drug maker, midday on November 13, 2015, as the early results of the firm’s campaign to acquire Perrigo appeared promising. The
After having acquired the OfficeMax superstore chain, Boise Cascade announced the sale of its paper and timber products operations to reduce its dependence on this cyclical business. Reflecting its
Ashland Chemical, the largest US chemical distributor, acquired chemical manufacturer Hercules Inc. for $$3.3$ billion. This move followed Dow Chemical Company’s purchase of Rohm & Haas. The
Nowhere is the impact of creative destruction more apparent than on the internet. We can be sure that the growth of the internet will continue to spawn new innovations challenging the survivability
Find a transaction currently in the news. Speculate as to what criteria the buyer may have employed to identify the target company as an attractive takeover candidate. Be specific.
Fresenius, a German manufacturer of dialysis equipment, acquired APP Pharmaceuticals for $\$ 4.6$ billion. The deal includes an earnout, under which Fresenius would pay as much as $\$ 970$ million if
MACs allow parties to the contract to determine who will bear the risk of adverse events between the signing of an agreement and the closing. They are frequently not stated in dollar terms. How might
Challenges of strategically realigning a firm• What it takes to achieve a "competitive edge"• The importance of getting out in front of rather than simply reacting to market changesWith the PC
While the EMC offer represented a $27 %$ premium to the EMC trading price immediately prior to the announcement of the deal, most of the premium comes from the problematic valuation of the tracking
When Daimler Benz acquired Chrysler Corporation, it announced that it could take 6–8 years to integrate fully the combined firm’s global manufacturing operations and certain functions such as
Pressured by activist investors to pursue growth, Men’s Wearhouse is the story of a clothing retailer that undertook an expensive and ultimately value-destroying acquisition. The firm had a history
How would you estimate the equity value of a firm if you knew its enterprise value and the PV of all nonoperating assets, nonoperating liabilities, and long-term debt?
Financial theory postulates that the value of a firm is determined by discounting projected net cash flows at an appropriate discount rate. In practice, buyers and sellers estimate the value of a
Abbott Lab’s market value plunged more than $$5$ billion or 6% in a single day following the announcement of the firm’s acquisition of St. Jude Medical (St. Jude) on April 26, 2016, as
Life Technologies (Life Tech), a leading global life sciences firm, had rewarded its shareholders by almost doubling the firm’s share price from its 2009 low of $$26$ per share to $$51$ by
What is the capitalization rate?
An analyst constructs a privately held firm’s cost of equity using the “buildup” method. The 10-year Treasury bond rate is 4% and the historical equity risk premium for the S&P 500 stock index
You have been asked by an investor to value a restaurant. Last year, the restaurant earned pretax operating income of $$300,000.$ Income has grown 4% annually during the past 5 years, and it is
Targacept still had substantial cash on hand but few attractive investment opportunities. Its prospects were to continue to burn cash by going it alone, seek a partner, or merge with a firm having
In a year marked by turmoil in the global credit markets, Mars Corporation was able to negotiate a reverse breakup fee structure in its acquisition of Wrigley Corporation.This structure allowed Mars
Deutsche Bank announced that it would buy the commercial banking assets (including a number of branches) of the Netherlands’ ABN Amro for $$1.13$ billion. What liabilities, if any, would Deutsche
DowDuPont would be the second largest chemical company in the world, behind BASF of Germany, with more than $$92$ billion in annual revenue. In an unusual display of financial restructuring linked
Acquiring Company buys 100% of Target Company’s equity for $$5$ million in cash. As an analyst, you are given the premerger balance sheets for the two companies. Assuming plant and equipment are
Imbruvica, the only drug Pharmcyclics sells. What makes Imbruvica so valuable is its future cash flow generation potential. In 2014, the drug brought in $$492.4$ million in sales, which AbbVie
Hospital chain HCA relied heavily on revenue growth in its effort to take the firm private. On July 24, 2006, management again announced that it would “go private” in a deal valued at $$33$
What is accumulated depreciation, and how does it tie into the income statement?
What is equity (net assets)?
What is fund accounting?
Briefly discuss two means by which a firm can monitor its receivables position.
Why do firms hold marketable securities portfolios?
How do the cash management practices of large and small businesses differ?
Why are operational and financial metrics important to good management?
How are KPIs and dashboards used to monitor operations?
What is the revenue cycle? Why is it important to healthcare organizations?
What is a receivable? Explain how receivables are built up over time.
Define average collection period. How is it used to monitor a firm’s accounts receivable?
Briefly describe float and why it is a useful cash management concept.
Sacred Heart Hospital has the following receivables amounts, listed by age:a. Complete the aging schedule by filling in the percentage of total value column.b. Interpret your results.c. Using these
Sacramento Memorial Hospital has the following annual financial data and operational metrics:a. What is the hospital’s profit per discharge?b. What is the hospital’s total inpatient and total
Northeast Medical Group, a family practice, has the following financial data and operational metrics:a. What is the group’s revenue per physician?b. What is the group’s operating cost per
What are the two primary factors that affect a loan’s interest rate?
What are the primary features of a term loan? Of a bond?
What is a corporate bond? A Treasury bond? A municipal bond?
Describe the features of a line of credit.
What is the purpose of a trustee?
What happens when a borrower defaults?
What is a call provision, and when are bonds typically called?
What are debt ratings?
What impact do ratings have on a borrower’s cost of debt?
What is the purpose of equity financing?
Do both for-profit and not-for-profit healthcare organizations have access to contribution capital?
Is capital structure important to managers of not-for-profit businesses? Explain your answer.
What factor most influences a business’s debt maturity structure?
How is the cost of debt estimated? What about the cost of equity?
Is the CCC the appropriate hurdle rate for all projects that a business evaluates?
The two primary factors that affect interest rates on debt securities are risk and inflation. Explain the role of each factor.
Briefly describe the features of the following types of debt:a. Term loanb. Bondc. Line of creditd. Municipal bond
Briefly explain the following debt features:a. Loan agreementb. Restrictive covenantc. Trusteed. Call provision
a. What do bond ratings measure?b. How do investors interpret bond ratings?c. Why are bond ratings important?d. What is credit enhancement?
Critique this statement: The use of debt financing lowers the profits of the firm, and hence debt financing should be used only as a last resort.
Discuss some factors that healthcare managers must consider when setting a business’s target capital structure.
How is a business’s cost of debt estimated? Its cost of equity?
Into what category would the open MRI project be placed?
Why are such analyses important in not-for-profit businesses?
Why are time lines so important in capital investment financial analyses?
How are NPV and IRR interpreted?
Can NPV and IRR lead to different conclusions about a project’s financial attractiveness?
Describe a project scoring system?
What is the difference between a new and a replacement project?
Define the concept of financial risk.
Explain the risk-adjusted discount rate (RADR) method for incorporating risk in the capital investment decision process.
Define financial risk. Why is risk analysis so important to capital investment decisions?
How is project risk incorporated into the capital investment decision?
What categories of revenue may be reported on the income statement?
Describe how the following types of revenue are reported on the income statement: (a) discounts from charges, (b) charity care, and(c) bad debt losses.
Consider the following 2016 data for Newark General Hospital (in millions of dollars):a. Calculate and interpret the two profit variances.b. Calculate and interpret the two revenue variances.c.
Why do managers at all levels need to be familiar with the organization’s strategic plan?
What is the primary difference between strategic and operating plans?
What does the term healthcare finance mean?
How does the size of the organization affect the finance department structure?
What are some forms of regulation in the healthcare sector?
What is the most pressing legal issue facing healthcare providers today?
What role does regulation play in the healthcare sector?
What is the structure of the finance function in healthcare organizations?
What is the primary legal issue facing providers today?
Briefly describe a business from a financial perspective.
How does a benefit corporation (B corporation) differ from a traditional for-profit corporation?
Why must a finance book consider taxes?

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