QUESTION Firm A had no credit losses last year, but 1% of Firm Bs accounts receivable proved to be uncollectible and resulted in losses. Should Firm B fire its credit manager and hire As? No, the Company should not take decision just on the basis of above information available. This is because it should do […]
Date: September 2nd, 2020
QUESTION Explain how each of the following factors would probably affect a firms target cash balance if all other factors were held constant:a. The firm institutes a new billing procedure that better aynchronizes its cash inflows and outflows.b. The firm develops a new sales forecasting technique that improves its forecasts.c. The firm reduces its portfolio […]
Date: September 2nd, 2020
QUESTION Discuss the pros and cons of having the directors formally announce what a firms dividend policy will be in the future. By formally announcing firms dividend policy, directors make public about the dividend, which sends positive news to the exchange market and investors start investing in that stock. By increasing the demand of the […]
Date: September 2nd, 2020
QUESTION When can we not simply compare the NPVs of two mutually exclusive projects? of the mutually exclusive projects. To compare the projects either the equivalent annuity approach or replacement chain method should be used. These approaches overcome the limitations of the net present value method when the projects are of different lives and the […]
Date: September 2nd, 2020
QUESTION What method of depreciation would you prefer, MACRS or straight-line, if your objective is to maximize the present value of your firms cash flows? n equal amount of depreciation is charged in all the years during the life of the asset. Thus, when the amount of depreciation is added back to the profits after […]
Date: September 2nd, 2020
QUESTION Days Sales in Receivables a company has net income of $195,000, a profit margin of 9.40 percent, and an accounts receivable balance of $106,851. Assuming 75 percent of sales are on credit, what are the companys days sales in receivables? Concept: Days sales in receivables of company show the number of days taken by […]
Date: September 2nd, 2020
QUESTION What is the rationale behind the NPV method? According to NPV, which project(s) should be accepted if they are independent? Mutually exclusive? erms of dollars. NPV method assumes that the reinvestment rate of return to be equal to the cost of capital. According to NPV method while evaluating the independent projects a project can […]
Date: September 2nd, 2020
QUESTION Common-size analysis is used in financial analysis toa. Evaluate changes in a companys operating cycle over time.b. Predict changes in a companys capital structure using regression analysis.c. Compare companies of different sizes or compare a company with itself over time.d. Restate each element in a companys financial statement as a proportion of the similar […]
Date: September 2nd, 2020
QUESTION What is the likely effect of inflation on the level of capital expenditures made by private firms? What must the financial manager do to ensure that a firms capital budgeting procedures will be effective in an inflationary environment? Answer: Inflation indicates general trend of rise in price of commodities in the market which led […]
Date: September 2nd, 2020
QUESTION You might expect the price of a mature firms stock to decline if it announces a stock offering. Would you expect the same reaction if the issuing firm were a young, rapidly growing company? e possible to be financed by the retained earnings. The young and rapidly growing company requires finance to finance the […]
Date: September 2nd, 2020
