CHAPTER 8 Flashcards
1
Q
issues with accouting and finance
A
- determining capital structure
- develop projected financial statement
- perform corporate valuation
- analyze financial ratio
- manage IPO, cash level, corporate bond
2
Q
capital structure
A
-portions of debt to equity on balance sheet
-perform EPS/EBIT analysis is common way to determine capital structure
2
Q
limitations of ebit/eps
A
- flexibility
- dilution
-timing - leverage situation
-continuity
3
Q
projected financial statement
A
- allow organization to examine expected result of various action and approach
- allow organizations to compute projected financial ratios under various strategy
3
Q
perform financial analysis
A
- prepared projected income statement before the balance sheet
- using % of sales to project COGS
- calculated projected net income
- subtract net income from any dividend to be paid
- project balance sheet item, start with retained earning to assets
- used cash account as plug figure
- list commentary on projected statements
4
Q
corporate valuation
A
- not an exact science
- based on financial facts but common sense and judgement enter the process
- different valuations methods will yield different total for firm worth
5
Q
the net income method
A
total share holder equity - (goodwill + intangible)
6
Q
the net income method
A
net income x 5
7
Q
price earning ratio
A
(stock price/ EPS) x NI
8
Q
outstanding shares method
A
- no shares outstanding x stock price
9
Q
financial ratio analysis based on
A
- how they change overtime
- how they compare to industry norm
- how they compare to key competitors
10
Q
go public with IPO
A
- selling % of company to raise capital
11
Q
issue corporate bond
A
- go to bank to borrow money instead company obtain funds from investors
