Corporate Finance - Concept Questions - 12247 Words

CONCEPT QUESTIONS - CHAPTER 1 1.1 ( What are the three basic questions of corporate finance? a. Investment decision (capital budgeting): What long-term investment strategy should a firm adopt? b. Financing decision (capital structure): How much cash must be raised for the required investments? c. Short-term finance decision (working capital): How much short-term cash flow does company need to pay its bills. ( Describe capital structure. Capital structure is the mix of different securities used to finance a firms investments. ( How is value created? ( List three reasons why value creation is difficult. Value creation is difficult because it is not easy to observe cash flows†¦show more content†¦( What are noncash expenses? Noncash expenses are items included as expenses but which do not directly affect cash flow. The most important one is depreciation. 2.3 ( What is net working capital? It is the difference between current assets and current liabilities. ( What is the change in net working capital? To determine changes in net working capital you subtract uses of net working capital from sources of net working capital. 2.4 ( How is cash flow different from changes in net working capital? The difference between cash flow and changes in new working capital is that some transactions affect cash flow and not net working capital. The acquisition of inventories with cash is a good example of a change in working capital requirements. ( What is the difference between operating cash flow and total cash flow of the firm? The main difference between the two is capital spending and additions to working capital, that is, investment in fixed assets and investment in working capital. 2.5 ( How is the Statement of Cash Flows in Table 2.4 different from cash flow of the firm in Table 2.3? CONCEPT QUESTIONS - CHAPTER 3 3.1 ( What are the two levels of the financial planning process? The time frame and the level of aggregation. ( Why should firms draw up financial plans? It accomplishes various goals: 1. It improves interactions between investment proposals for theShow MoreRelatedBrief Introduction Overview of McGraw Hills 9th Edition of Fundamentals of Corporate Finance655 Words   |  3 PagesReview Fundamentals of Corporate Finance – Ross, Westerfield, Jordan McGraw Hill Education (India), 2012, 878 Pp 9th edition ISBN: 13:978-1-25-9027628 Kumar Ratnesh* About Authors Stephen A. Ross is the Franco Modigliant Professor of Finance Economics at the Sloan School of management, Massachusetts Institute of Technology. Randolph W. Westerfield is Dean Emeritus of the University of Southern California’s Marshall school of Business. Bradford D. Jordan is Professor of Finance Holder of the RichardRead Moreassig11515 Words   |  7 Pagesï » ¿ Assignment – 1 Introduction to Financial Management Question 1: Separate the following list of assets into real assets and financial assets. 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