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Financial Management > Incorrect questions > Flashcards

Incorrect questions Flashcards

1
Q

what is business angel factoring

A

private individuals or groups of individuals investing directly into a small business

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2
Q

is supply chain finance considered financial debt

A

no

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3
Q

what does supply chain finance enable small businesses to do

A

raise finance at a lower interest rate than would normally be available to it

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4
Q

what else is supply chain finance named

A

reverse factoring

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5
Q

what technique is most important to be high to maximise shareholder wealth

A

NPV

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6
Q

advs of IRR over investment appraisal

A

takes into account time value of money

considers whole project

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7
Q

how would an increase of cost of capital affect NPV

A

it would decrease

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8
Q

how would an increase of cost of capital affect IRR

A

no effect

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9
Q

what is the formula for total shareholder return

A

(p1-p0+d1)/p0
where p1 = share price this year
p0- share price in the previous year
d1= dividend per share

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10
Q

what is the reverse yield gap

A

yields on share being lower than on low risk debt

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11
Q

what does disintermediation mean

A

borrowers dealing with lenders directly

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12
Q

what type of instrument is a certificate of desposit

A

money market

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13
Q

are treasury bills bought and sold on a discount basis

A

yes

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14
Q

what is a secondary market

A

securities are bought and sold by investors

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15
Q

who are money markets mainly used by

A

large companies

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16
Q

is money market lending securitised

A

yes

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17
Q

if a government has a macroeconomic policy what 2 things will they do

A

increase public expenditure

decrease tax

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18
Q

2 main goals of macro economic policy

A

low and stable inflation

balance between exports and imports

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19
Q

does sales increase as working capital does

A

yes

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20
Q

what will an increase in the cash operating cycle do

A

decrease profitability

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21
Q

what kind of factoring provides insurance against bad debts

A

factoring with no recourse

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22
Q

does factoring with recourse help with bad debts

A

no

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23
Q

how do you calculate annual holding costs

A

average inventory / 2 * holding cost per unit

24
Q

how do you calculate average inventory

A

monthly order / 2

25
Q

how can you use historic dividend growth to predict future growth

A

g = (n x square root of latest div/ earliest div ) -1

or

1+g = ( latest div / earliest div) 1/n

26
Q

how can you calculate future dividend growth from reinvestment levels

A

g = b x re

27
Q

what is Ve in WACC calculation

A

total market value of shares ( ex div)

28
Q

what is Vd in WACC calculation

A

total market value ex interest of debt

29
Q

what is Ke in WACC calculation

A

cost of equity in a geared company

30
Q

what is Kd in WACC calculation

A

cost of debt

31
Q

what method must be used if debt is redeemable

A

IRR approach

32
Q

how can you calculate cost of equity

A

CAPM or dividend valuation depending on info given

33
Q

what is the dividend valuation

A

(D1 x (1+g) / Po) + g

34
Q

profitability index formula

A

present value of cash flows / initial cash flows

35
Q

what does PI mean

A

profitability index

36
Q

when can you use PI

A

when the projects are divisible

37
Q

how to calculate EAC

A

NPV of costs over replacement cycle / Annuity factor for life of asset

38
Q

what is maturity transformation

A

the process by which short term deposits are re- lent by banks as longer term loans

39
Q

formula for Dividend cover

A

EPS / Dividend Cover

40
Q

Formula for EPS

A

Dividend cover x Dividend per share

41
Q

Formula for Earnings yield

A

EPS / Market price per share

42
Q

how to calculate growth

A

nth root of( latest dividend / oldest dividend) - 1

43
Q

is matching a method of translation exposure

A

no, its a method of transaction exposure

44
Q

what does the br mean in g = br

A

proportion of profits retained x rate of return on investment

45
Q

how to calculate proportion of profits retained

A

eps - dividend / eps

46
Q

how to calculate rate of return on investment

A

EPS/ Net assets per share

47
Q

formula for operational gearing

A

Contribution / PBIT

48
Q

what is the basis risk

A

possibility that currency futures and spot rate will be different

49
Q

2 benefits of a financial intermediary

A

transforms maturity and risk

50
Q

does the earnings yield and dividend growth model give a similair outcome

A

no

51
Q

what is the maximum value of a company

A

market capitalisation

52
Q

what is the price / earnings ratio a reciprocal of

A

earnings yield

53
Q

what type of instrument is a commercial paper

A

money market

54
Q

one way to calculate growth rate

A

share retention rate x return on equity rate

55
Q

what is higher, an interest rate floor or a collar

A

interest rate floor

56
Q

does the nature of interest rates futures mean you cant over or under hedge

A

no

Financial Management (8 decks)

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