Busıness Fınance I

Yanıt Açıklaması: Aggressive policy, as the name suggests, is specified as the most risky working capital financing policy as a higher proportion of current assets including permanent ones is financed by the short-term debt. To apply such a policy, the company should ensure that the receivables are supposed to be collected on time and payments to the creditors are easily made as late as possible.

Yanıt Açıklaması: Inventories can be classified into five major categories: Raw Material: It is the basic and the most important part of inventories. These are goods directly or used in the production process, and the expenses incurred for the procurement of raw materials are reflected to the cost per unit of product. - Work in Progress: These include those materials which have been committed to production process but have not yet been completed. - Consumables: These are the materials which are needed for smooth running of the manufacturing process. - Finished Goods: These are the final output of the production process. - Spares: It is also a part of inventories which includes small spares and parts. The correct answer is C.

Yanıt Açıklaması: Outstanding expenses are current liabilities. The other options are current assets.

Yanıt Açıklaması: Dividend Yield ratio is computed and expressed as follows : Dividend Yield = Annual Dividends per Share / Current Market Price Therefore, the correct answer is A.

Yanıt Açıklaması: Capital-Asset-Pricing Model is a model describing the relationship between the systematic risk of a security, namely beta, and expected returns. As long as the market risk premium is positive, higher beta value bring higher returns.

Yanıt Açıklaması: Volume of business: Generally, there exists a strong positive relationship between the size of the company and the working capital needs. The size of a company is defined in terms of sales volume and/or asset size. Whatever the terms of reference of size, increase in size generates higher activity level, larger amount of production, inventory, sales, ending up with higher amounts of raw materials and suppliers credits. The correct answer is B.

Yanıt Açıklaması: Unexpected returns are the result of new unexpected information arriving to the market during the period. Some examples of relevant new information arriving to the market could be things like: • Announcement of the latest growth rate of the economy • Large swings in the value of the national currency • Announcement of a new contract to sell large quantity of products to another country • News of a large accident at the factory • Announcement of a new facility being built that will significantly increase the production capacity of the company

Yanıt Açıklaması: Percentage of Sales Method: Firstly, the accounts mostly affected by the changes in the sales volume are determined. Amongst these accounts are inventories, cash on hand and banks, as well as trade receivables. Typically equity and affiliate accounts are not directly affected from the changes in sales volume. The method can be applied in the means of daily sales or sales percentage approach. Sales Percentage Method is the mostly preferred method.

Yanıt Açıklaması: Capital Cost: It is a fact that selling on credit creates a financing requirement for the company for the period between the date of sale of goods to the customer and the date of payment made by the customer as it should keep making payments to the employees, suppliers of raw materials, etc. Thus, a company in the course of expanding sales through receivables incurs additional capital costs.

Yanıt Açıklaması: Suppose that a bond pays coupons semi-annually and has a coupon rate of 15% with a maturity of 5 years. A bond investor is expected to receive 10 (2 x 5 years) coupon payments, each paying 7.5 (15/2) over the five-year period and receive par value after 10 periods.  Then, the value of this semi-annual coupon paying bond is 107,1888, so the correct answer is E.

Yanıt Açıklaması: Delinquency Cost: This type of cost arises on account in relation with the delay in payment of receivables by the customer when they fall due and become doubtful debts.

Yanıt Açıklaması: Only two of them can be motivations of holding cash which are transaction and precautionary motives.

Yanıt Açıklaması: According to Standard & Poors, AAA rated bonds are the safest, have lowest default risk whereas those that are rated BB or lower are expected to have high default risk and considered as junk bond. Junk bonds are required to provide very high yield in order to attract investors to invest in these bonds. Therefore, the correct option is A.

Yanıt Açıklaması: Delinquency Cost: This type of cost arises on account in relation with the delay in payment of receivables by the customer when they fall due and become doubtful debts. Some sanctions can be applied such as blocking of company’s funds for a period of time until the payment is realized, costs associated with the collection of overheads and legal expenses.

Yanıt Açıklaması: Examples of economy wide systematic risks are things like changes in inflation, exchange rates, declaration of wars, etc. On the other hand, company or security specific (idiosyncratic) risks are referred to as unsystematic risks.

Yanıt Açıklaması: The average returns (U.S. 1926-2017) U.S. Small Stocks 16.5% U.S. Large Stocks 12.1% U.S. Long Term Corporate Bonds 6.3% U.S. Long Term Government Bonds 6.0% U.S. Treasury Bills 3.4% According to the data above, U.S. Small Stocks are expected to yield more.

Yanıt Açıklaması: Total investment C0 = 200 x 1= T200 Capital gain (220 − 200) x 1= T20 Dividend T30 20+30:50

Yanıt Açıklaması: Compared to bonds, there are uncertainties about cash flows of stocks and several assumptions have to be made. It can be assumed that the stocks of similar companies should be priced in a similar way because investors are prepared to pay similar price for each lira of assets or earnings. It is called valuation by comparables. The common ratios used as comparables are price-earnings (P/E) ratio, market value-to-book value (MV/BV) ratio, price-to-sales ratio, price-to-cash flows ratio and PEG, defined as the P/E ratio divided by the growth rate of earnings. As also understood from the information given, all of the ratios given in the options are the common ratios used as comparables in the context of valuation by comparables, so the correct answer is E.

Yanıt Açıklaması: Turnover of working capital: Turnover of the working capital is realized by the sale of goods. In certain businesses, sales are made quickly and in order to materialize the final product the inventories of raw materials are used quickly so new purchases have to be made. In this manner, a small amount of money invested in stocks will result in sales of much larger amount.

Yanıt Açıklaması: The relationship between the size of the company and the working capital needs is strongly positive, not negative. Thus only IV is false, all other statemens are true.