a. Discuss the factors that are likely to influence the desired level of cash of a companyb. Outline the advantages and disadvantages of using short term debt, as opposed to long term debt, in the financing of working capit. 1c. Why cash flows rather than profits are most desirable in financial management?d. Explain the term "agency relationships" and discuss the conflicts that might exist in the relationship between'i) Shareholder and managersii) Shareholders and creditorsWhat steps may be taken to overcome these conflicts? (.

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Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter12: Valuation: Cash-flow Based Approaches

Section: Chapter Questions

Problem 4QE

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How do creditors assess risk when lending funds to a company?
The cost of equity is _______. A. the interest associated with debt B. the rate of return required by investors to incentivize them to invest in a company C. the weighted average cost of capital D. equal to the amount of asset turnover
What insight does the calculation of free cash flow provide about the companys cash flow position?
a. Discuss the factors that are likely to influence the desired level of cash of a company b. Outline the advantages and disadvantages of using short term debt, as opposed to longterm debt, in the financing of working capitalc. Why cash flows rather than profits are most desirable in financial management? d. Explain the term “agency relationships” and discuss the conflicts that might exist in therelationship between’i) Shareholder and managersii) Shareholders and creditorsWhat steps may be taken to overcome these conflicts?
Discuss the factors that are likely to influence the desired level of cash of a company Outline the advantages and disadvantages of using short term debt, as opposed to long term debt, in the financing of working capital Why cash flows rather than profits are most desirable in financial management? Explain the term “agency relationships” and discuss the conflicts that might exist in therelationship between’i) Shareholder and managersii) Shareholders and creditors
See images below and answer these questions according to the financial information given Requirements 1. Answer the following questions for the directors: A. True or false, does the statement of cash flows explains the difference between net income and the change in the cash balance? B. True or false, investors and management use the statement of cash flows to evaluate a firm's profitability? c. True or false, the financing activities section of the statement of cash flows includes paying dividends and paying off loans? D. True or false, the financing activities section of the statement of cash flows reflects the cash flows that affect current assets and liabilities? E. True or false, buying property, plant and equipment would be considered a cash outflow from financing? F. True or false, the financing section of the statement of cash flows reflects transactions in the equity accounts and the long-term liability accounts? c. True or false, suppose Auga Company Ltd just started…
Answer the following questions for the directors: True or false, does the statement of cash flows explains the difference between net income and the change in the cash balance? True or false, investors and management use the statement of cash flows to evaluate a firm's profitability? True or false, the financing activities section of the statement of cash flows includes paying dividends and paying off loans? True or false, the financing activities section of the statement of cash flows reflects the cash flows that affect current assets and liabilities? True or false, buying property, plant and equipment would be considered a cash outflow from financing? True or false, the financing section of the statement of cash flows reflects transactions in the equity accounts and the long-term liability accounts? True or false, suppose Auga Company Ltd just started business and was looking for additional capital in order to purchase a property to build their headquarters. If they found an…
Answer the following questions for the directors: True or false, does the statement of cash flows explains the difference between net income and the change in the cash balance? True or false, investors and management use the statement of cash flows to evaluate a firm's profitability? True or false, the financing activities section of the statement of cash flows includes paying dividends and paying off loans? True or false, the financing activities section of the statement of cash flows reflects the cash flows that affect current assets and liabilities? True or false, buying property, plant and equipment would be considered a cash outflow from financing? True or false, the financing section of the statement of cash flows reflects transactions in the equity accounts and the long-term liability accounts? True or false, suppose Auga Company Ltd just started business and was looking for additional capital in order to purchase a property to build their headquarters. If they found an…
A. In the long run it is more important for a business to have positive cash flows from itsoperating activities, investing activities or financing activities? Why?B. Identify three factors that may cause net income to differ from net cash flows from operatingactivities.C. Describe how the Statement of Cash Flows helps investors and creditors perform each ofthe following functions: predict future cash flows; evaluate management decisions; predictthe ability to make debt payments to lenders and pay dividends to stockholders.D. Name and explain the three (3) categories of cash-flow activities.
Identify which one of the following statement is not correct: a. Dividend decision is the primary function of the financial manager b. The financial manager need not concentrate on mobilization of finance c. Cash management plays a major role in the area of finance d. Management control is an emerging role of the financial manager
1. What is a Working capital management?a. It is the placement of the firm’s debt and equity issues.b. It is the financing and management of the firm’s current assets.c . It is also known as inventory management .d. It is the management of the firm’s capital assets. 2. What is the transactional motive of holding cash?a. To keep a cash reserve for purchasing goods and services to balance out the cash inflows and outflows.b. To keep the cash for all the transactions made during a periodic term.c. To keep the cash for transactions mandatory for day to day activities. d. To keep the transactions for foreign trading.3. Below are all components of working capital except:a. Cash c. Marketable Securities b. Inventories d. Notes Payable 4. In what order will a company’s current assets appear on a classified balance sheet?a. Alphabetical order c. From largest to smallest amountb. Company’s choice d. Order of Liquidity 5. Which of the following would not be important in examining the firm's…
A. Undeniably, profitability is the ultimate goal of companies and readers of a company’s financial statements are very much interested in the reported profit figure. The profit figure is achieved by the preparation of the statement of profit or loss and the statement of financial position. If the foregoing is the case, why then bother about the statement of cash flows? B. Globally, accounting standards are developed based on different methods. It is generally agreed that the nature of accounting standards depends on the systems of regulation. It has been argued that there are two main systems of regulation. Required: Identify and explain the difference between the two systems of regulation, stating clearly which system you believe describes the International Financial Reporting Standards (IFRS)

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