BFIN 320 – Midterm Exam . Financial Ratios, NPV, TVM – All Solved

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BFIN 320 – Midterm Exam Bundle . Financial
Ratios, NPV, TVM – All Solved

Questions and Mark scheme


Version: Final 1.1

, managerial compensation - ✔✔--incentives can be used to align management and stockholder interests

--need to be structured carefully to achieve the goal--makes managers make decisions that maximize value



corporate control - ✔✔--the threat of a takeover may result in better management



How do we measure shareholder wealth? - ✔✔By stock price



Accrual accounting - ✔✔1) recognize revenue when its earned by the firm

"a firm can recognize revenue when the order is virtually complete and it is reasonable that payment will be collected"

2) match expense stream to revenue stream



Boeing example of accrual accountig - ✔✔Most aggressive

--recognize revenue at order placed/contract signed

Least aggressive

--recognize revenue when last place of order delivered



Income Statement format - ✔✔Revenues

-COGS

-other expenses

-depreciation

EBIT

-I (compensation back to debt holders)

EBT

-T

NI (belongs to equity holders in the form of dividends)

-dividends

Addition to RE



Balance sheet format: assets side - ✔✔Assets

C Assets