Managerial Finance Study Guide
Study Guide – Final Exam Managerial Finance – Spring 2012
Chapters 1- 4 (5%) * Know goal of the financial manager * Define agency problem * Describe the four areas of Ratio Analysis (liquidity, activity, solvency, and profitability) and their purpose, know information that gives ratios value and meaning.
Chapter 5 (15%) * Time Value of Money: PV, PMT of loan, FV of annuity, growth rate and mixed stream of cash flows
Chapter 6-8 (46%) * Expected return, Standard deviation and Coefficient of variation of a single asset (Prob 8-5 but also find Standard deviation and CV, or prob.8-11, with only 2 assets and 2 scenarios.) * Portfolio return and SD ( ST8-1, prob. 8-13) * Know the definition and meaning to CAPM, including beta, market risk premium and asset risk premium * Understand beta’s effect on risk, return and share price * Know the definition of diversifiable and nondiversifiable risk and examples of each * Know definition and equation for Real, risk free and nominal rate of interest * Calculation the price and YTM of bonds (prob 6-17 and Prob 6-21), both with annual and semi-annual rates of return * Understand why the required returns of bonds change and be able to explain the relationship between the required return, the coupon rate, the par value and the price of the bond. * Know the difference between a premium bond, discount bond and par bond. * Calculation the price of stock – using no growth, constant growth, and variable growth * Financial Decisions based on Stock Value – study last few pages of chapter where this and reviewed and Prob. 7-19.
Chapter 14 & 15 (34%) * Define Net Working Capital and understand the risk/profit issue of managing short term financing. (Study Chart on pg. 640 table 14.1) * Seasonal/permanent financing problem with aggressive/conservative strategy– similar to 14-4 * Define 3 levels of current liabilities: Spontaneous Financing, unsecured and
Chapters 1- 4 (5%) * Know goal of the financial manager * Define agency problem * Describe the four areas of Ratio Analysis (liquidity, activity, solvency, and profitability) and their purpose, know information that gives ratios value and meaning.
Chapter 5 (15%) * Time Value of Money: PV, PMT of loan, FV of annuity, growth rate and mixed stream of cash flows
Chapter 6-8 (46%) * Expected return, Standard deviation and Coefficient of variation of a single asset (Prob 8-5 but also find Standard deviation and CV, or prob.8-11, with only 2 assets and 2 scenarios.) * Portfolio return and SD ( ST8-1, prob. 8-13) * Know the definition and meaning to CAPM, including beta, market risk premium and asset risk premium * Understand beta’s effect on risk, return and share price * Know the definition of diversifiable and nondiversifiable risk and examples of each * Know definition and equation for Real, risk free and nominal rate of interest * Calculation the price and YTM of bonds (prob 6-17 and Prob 6-21), both with annual and semi-annual rates of return * Understand why the required returns of bonds change and be able to explain the relationship between the required return, the coupon rate, the par value and the price of the bond. * Know the difference between a premium bond, discount bond and par bond. * Calculation the price of stock – using no growth, constant growth, and variable growth * Financial Decisions based on Stock Value – study last few pages of chapter where this and reviewed and Prob. 7-19.
Chapter 14 & 15 (34%) * Define Net Working Capital and understand the risk/profit issue of managing short term financing. (Study Chart on pg. 640 table 14.1) * Seasonal/permanent financing problem with aggressive/conservative strategy– similar to 14-4 * Define 3 levels of current liabilities: Spontaneous Financing, unsecured and