Chapter 9 End Of Chapter Questions Essay

2340 Words10 Pages
Chapter Nine Finance: Acquiring and Using Funds to Maximize Value Review Questions 1. What is the key goal that guides the decisions of financial managers? What challenges do financial managers face when they try to find the best sources and uses of funds to meet this goal? The financial mangers goal is acquisition, financing, and management of assets. The challenges are investment, financing, and asset management decisions. 2. List the four basic types of financial ratios used to measure a company’s performance, give an example of each type of ratio and explain its significance. Liquidity, Solvency, Profitability, and Efficiency are the basic types of financial ratios. The liquidity ratio is the ratio of current assets to…show more content…
If a company's variable costs are higher than its fixed costs, the company is said to be using less operating leverage. 8. Is it possible for a firm to have too much money? Explain. What role does cash equivalents play in a financial manager’s strategy to manage cash balances? Yes because it means there can be problems in the future. They get taxed more and they don’t know what to invest the money in. They use it to show the company’s strengths and weakness. The can use it to make balance sheet, cash flow statement, and income statement. 9. Why is the $1,000 you receive today worth more than $1,000 you receive next year? What concept does this illustrate? Why is this concept particularly important when firms evaluate capital budgeting proposals? It is worth more this year rather than next year because if you receive it this year and you decide to invest in it you will gain interest on the thousand dollars you received this year. It illustrates the concept of interest. It is important for firms because it benefits them in terms of long term investment. 10. What is the net present value (NPV) of a long-term investment project? Describe how managers use NPVs when evaluating capital budget proposals. The NPV of an investment proposal is found by adding the present values of all of its estimated

More about Chapter 9 End Of Chapter Questions Essay

Open Document