Busıness Fınance I

Yanıt Açıklaması: Process of making long-term decisions on fixed asset investments is called as capital budgeting. Capital budgeting concerns with the amount of, risk of, and timing of expected cash flows from a long-term investing opportunity. Decisions about capital budgeting include finding answers to problems such as which investment project to take, which alternative options to consider, etc.

Yanıt Açıklaması: Annual percentage rate (APR) is the stated rate of which banks, credit card companies, mortgage loan officers tell you they charge. On the other hand, two banks stating both are charging 10% interest rates does not necessarily mean that both are charging the same interest. Payment times are highly critical to compare 10% of these two banks and hence effective rates could be different. Therefore, one should employ effective annual rate to compare.

Yanıt Açıklaması: The degree of operating leverage is a concept widely used to assess the operating risk of a business stemming from its cost structure. Basically, the degree of operating leverage shows how much the operating income of the business changes with a relative change in its sales. In fact it is a multiple depicting how many times the operating income of a business changes in relation to a percentage change in the sales.

Yanıt Açıklaması: Although there are several available ratios in the literature, most commonly used ratios are within the following classifications. • liquidity ratios • solvency/capital structure ratios • working capital management ratios • profitability ratios • market ratios

Yanıt Açıklaması: The contribution margin ratio is the division of the unit contribution margin by the sales price per unit.

Yanıt Açıklaması: $200,000

Yanıt Açıklaması: The present value of 1.000 one year from now equals 909,09. So if you take this amount and put it into the bank account paying 10% for one year. You will end up with the 1.000 you need at the end of the year.

Yanıt Açıklaması: The variable costs directly change in proportion to the level of activity while the fixed costs are the same within a specific activity range.

Yanıt Açıklaması: Profitability ratios measure tor operating success of a company in regards to its resources. Starting point to profitability analysis is the Return on Equity (ROE) ratio because it provides an indication of how well managers are employing the invested funds in business to generate returns. The correct answer is D.

Yanıt Açıklaması: In vertical (or common size analysis), the items in the financial statements are expressed as a percentage of total assets or sales. e main advantage of vertical analysis is that such an analysis is not much affected by price fluctuations and that it lets industry-wide comparisons.

Yanıt Açıklaması: A financial company is a company with a main business activity in financial areas. Therefore A is the correct answer.

Yanıt Açıklaması: Margin of Safety($) = Actual/Budgeted Sales($)-Break-even Sales($) 950.000-700.000=250.000

Yanıt Açıklaması: The Future Value (FV) is the amount of money an investment will grow to over a period of time, at a given interest rate (r).

Yanıt Açıklaması: Acid test (quick ratio) is an example of a liqudity ratio.

Yanıt Açıklaması: Machinery manufacturers are non-financial companies.A non-financial company may serve as a borrower and/or as a lender in a financial system.

Yanıt Açıklaması: The term finance means money in very broad terms. Cash refers to immediate spendable funds such as currencies and coins. Cash equivalent is a short-term (less than three months) investment such as treasury bills. Cash and cash equivalents are the most convenient assets of a company, and they can be immediately used for current consumption. Although the term fund is sometimes used same with cash, it has a different meaning. Fund refers to money, which is preserved for a specific objective whether in the form of cash, credit, cheque, or other resources. The main difference between cash and fund is that cash is a short- term asset, whereas fund is a short-term or long-term liability for a company.

Yanıt Açıklaması: For the owners, the company is a venture, with opportunities, threats, and responsibilities. For customers, the company is a supplier. For suppliers, it is a customer. For lenders, it is a way for their money to earn money. For employees it is primarily a workplace – a place they depend on for their livelihood, for fellowship and for a certain quality of life. For the community the company is an entity that enables it to provide security and service to all of its members.

Yanıt Açıklaması: Ratios are very popular among a variety of internal and external users – from managers, investors, creditors, and the government to employees and potential investors. Users prefer ratio analysis, believing that ratios signal potential problem areas that need further investigation.Although there are several available ratios in the literature, we will illustrate the most commonly used ratios within the following classifications. liquidity ratios solvency/capital structure ratios working capital management ratios profitability ratios market ratios

Yanıt Açıklaması: Labor is not a component of financial system.

Yanıt Açıklaması: Contribution Margin Ratio = (P-VC)/P = (50-20) / 50 = 0.6 Break-even sales in dollars = Fixed Costs / Contribution Margin Ratio = 600,000 / 0.6 = 1,000,000