Week 1 DQ:
What are the economic conditions (including international aspects) that affect the cost of money?
Week 2 DQ:
Investors and creditors are typically not interested in the same thing. Investors are typically interested in whether a company is going to turn a profit over time, while a creditor is interested in short-term cash flow. Decide whether you are an investor or creditor. Choose two ratios for the type of external user you chose and discuss its importance in analyzing a company.
When reviewing the financial statements of a company, there are many different ratios to choose from. Choose a ratio that looks at liquidity, solvency and profitability and discuss its importance
Week 3 DQ:
Bannister Legal Services generated $2 million in sales during 2010, and its year-end total assets were $1.5 million. Also, at year-end 2010, current liabilities were $500k, consisting of $200k in notes payable, $200k in accounts payable and $100k in accruals. Looking ahead at 2011, the company estimates that its assets must increase at the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its profit margin will be 5% and its payout ratio will be 60%. How large a sales increase can the company achieve without having to raise funds externally; that is, what is its self-supporting growth rate?
Refer to Problem 12-1. What would be the additional funds needed if the company’s year-end 2010 assets had been $4 million? Assume that all other numbers, including sales are the same as problem 12-1 and that the company is operating at full capacity. Why is this AFN different from the one you found in Problem 12-1? Is the company’s “capital intensity” ratio the same or different?
Week 4 DQ:
Ethics are an important aspect of corporate culture. The tone at the top is part of what sets expectations for employees. Describe the tone at the top of your organization. If you were in charge, what would you do differently?
Focus on a governmental agency and how it impacts ethical compliance. Discuss the agencies purpose and what you believe it is doing to combat unethical business practices. If you were in charge of setting policy, what would you do differently?
Week 5 DQ:
Discounted cash flow techniques are capital budgeting techniques that take into account both the time value of money and the estimated net cash flow from an investment. These techniques take into account the fact that cash flows that occur early in the life of an investment will be worth more than those that occur later. The primary discounted cash flow technique is called net present value. Describe this method. How is the NPV calculated and what is the decision rule?
Class, I'm sure many of you remember the Publisher's Clearing House sweepstakes - like me, some of you may even have been a finalist for the super prize of $10 million. :-) If you did win this prize, you would not actually receive a check for $10 million. Instead, you would receive $500,000 per year for 20 years. Imagine that you actually were the lucky winner. From a purely financial standpoint, would you be willing to accept $8 million today rather than $500,000 per year for the next 20 years? Why or why not? What non-financial factors might also be considered?
Week 6 DQ:
Read the “Global Economic Crisis” story on p. 197. Discuss the credit default swaps and the effects it had on the financial crisis.
Read the “Global Economic Crisis” story on p. 199. Discuss what it means to have the treasury bond downgraded and what ripple effects happen because of it.
Week 7 DQ:
In chapter 7, it has been argued that stock’s market price can deviate from its intrinsic value. Discuss the following question: If all investors attempt to behave in an entirely rational manner, could these differences still exist? In answering this question, think about information that’s available to insiders versus outsiders, the fact that historical probabilities of financial events are “fuzzier” than probabilities related to physical items, and the validity of the concepts of animal spirits, herding and anchoring.
Suppose you owned a portfolio consisting of $250,000 of U.S. government bonds with a maturity date of 30 years. Would your portfolio be riskless? What if your portfolio consisted of $250,000 of 30-day Treasury bills? Every 30 days your bills mature, and you reinvest the principle ($250,000) in a new batch of bills. Assume that you live on the investment income from your portfolio and that you want to maintain a constant standard of living. Is your portfolio truly riskless? Can you think of any asset that would be completely riskless? What security comes closest to being riskless? Explain.
Week 8 DQ:
We have talked about a lot of various financial topics throughout the course. Please choose two things that you felt were most relevant to you and discuss. If you were to provide the next set of students a set of “must do’s” for the course, what would you recommend?
Week 1 DQ: