Finance

Question 1

Non-current assets

Answer 1

Anlagevermögen

-useful life of more than a year
-land, property, plant, trademarks

Question 2

Current assets

Answer 2

Umlaufvermögen

-less than a year to turn into cash
-cash, inventory, accounts receivable

Question 3

Liabilities

Answer 3

Verbindlichkeiten
-debt, loan
-external financial resource

Question 4

Retained earnings

Answer 4

Gewinnrücklagen
+Equity = Internal Financial Resources

Question 5

Future Value of a single cash flow

Answer 5

Future value of some amount of money today. Expected ending value of the investment after N periods.
-> assume that we can reinvest our money every year at the same interest rate r

Question 6

Present Value of Cash flows

Answer 6

The current value of a future sum of money or stream of cash flows given a specified rate of return.
-> this formula when different cash flows per period

Question 7

Present value of perpetuities

Answer 7

Constant stream of identical cash flows with no end

When a G is given its with a growing rate

Question 8

Present value of annuities

Answer 8

Present value of N equal cashflows paid at regular intervals

Question 9

Future Value of Annuity

Answer 9

Value of annual payment at the end of the period

Question 10

Investment Decision rules

Answer 10

-profitable -> creates value&increases value of firms

-Revenues-cost>0
-Return>Hurdle Rate (minimum acceptable rate
-NVP >0

Question 11

Investment side

Answer 11

Assets=Non-current assets + Current assets

Question 12

Financing side

Answer 12

Liabilities+Equity

Question 13

Premium bond

Answer 13

-bond trading above its face value
-coupon rate higher than current market interest rates

Question 14

Discount bond

Answer 14

-issued for less than its face value
-trades in the market for less than the face value

Question 15

Zero-Coupon-Bond

Answer 15

-does not pay interest
-face value paid at maturity
-difference between purchase price and face value indicates the investors return
-estimated interest rate, yield, paid
-> you get at the end more than you paid for it in the beginning

Question 16

Floating rate bonds

Answer 16

-coupon periodically adjusted
-coupon rate: reset once a year to the current short-term treassury
-> according to current interest rates
-> much more stable in trading

Question 17

Convertible bonds

Answer 17

-can be exchanged against other financial securities
- e.g. into stocks

Question 18

CCC=Cash Conversion Cycle

Answer 18

Receivable days Acc + Inventory days - Accounts Payable days

Question 19

Inventory Days

Answer 19

Inventory / Average Daily Cost of Goods Sold

Question 20

Inventory Days

Answer 20

Inventory / Average Daily Cost of Goods Sold

Question 21

Accounts Receivable Days

Answer 21

Accounts Receivable/ Average Daily Sales

Question 22

Accounts Payable days

Answer 22

Accounts Payable/ Average Daily Cost of Goods Sold

Question 23

Average daily cost of goods sold

Answer 23

Cost of goods sold/ 365

Question 24

Average daily sales

Answer 24

Sales/365

Question 25

Lease payment

Answer 25

Increases Expense

Question 26

Operating Lease

Answer 26

-lessee reports the entire lease payment as an operating expense
-does not deduct depreciation expense

Question 27

Financial lease

Answer 27

-lessee lists assets on balance sheet and incurs depreciaction expenses
-lists PV of future lease payments as a liabikity and deducts the interest portion as an interest expense

Question 28

Why leasing cheaper than buying

Answer 28

-reduced resale costs
-exonomies of scale and efficiency gains
-better package deals
-reduced risk for the creditor
-possible tax advantages
-avoiding capital expenditure cost

Question 29

Disadvantage

Answer 29

-lessee has less of an incentive to take proper care of an asset
-you might get a service that you don’t need
-wrong feeling of financial stability