Why should company managers or investors pay attention to macroeconomic indicators? Is it a good idea for company managers to do a formal review of key macroeconomic indicators every quarter (every 3 months) or is it a waste of time?
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- UANG Financials is quite certain that interest rates are going to decrease next month. How should the bank manager adjust the bank’s maturity gap to increase its equity value when interest rates decrease ? Group of answer choices The bank should set its maturity gap to a positive position. In this case, as rates decrease, market value of assets will increase by less than the increase in market value of liabilities. The bank should set its maturity gap to a negative position. In this case, as rates decrease, market value of assets will decrease by less than the decrease in market value of liabilities. The bank should set its maturity gap to a negative position. In this case, as rates decrease, market value of assets will decrease by more than the decrease in market value of liabilities. The bank should set its maturity gap to a positive position. In this case, as rates decrease, market value of assets will increase by more than the increase in market value of…Suppose the company has to revise its estimates because of a downturn in the economy. Unit sales for August, September, and October will be half (50%) of the original estimates. Revise the estimates in cells 1311 through 1313. After this is done, check your forecasted balance sheet. It should still balance! What effect will this new state of affairs have on net income and borrowing? Explain why these items changed.You are the CPA for a large firm that is having a rough year and may not make analysts’ forecasts. The firm is considering changing from LIFO to FIFO, as that will increase income and may put them at the point of making the analysts’ forecasts. Do you think that they should make the change? Why or why not
- Can a firm have negative residual income (i.e., abnormal earnings)? What does this mean? Suppose you are valuing a growing firm and you forecast that it will have negative abnormal earnings for the next five years. Can you use the abnormal earnings valuation approach when abnormal earnings are negative?1. Why is the study of financial management important? Offer examples of how poor financial management can ruin a company. Provide specific real-life examples to back up your assertions. 2. Pick a decade (from 1920’s to today) and discuss the market performance in that 10 year period. What were some of the major drivers of performance during that decade?How would each of the following factors affectratio analysis? (a) The firm’s sales are highly seasonal. (b) The firm uses some type of windowdressing. (c) The firm issues more debt and usesthe proceeds to repurchase stock. (d) The firmleases more of its fixed assets than most firmsin its industry. (e) In an effort to stimulate sales,the firm eases its credit policy by offering 60-daycredit terms rather than the current 30-day terms.How might one use sensitivity analysis to helpquantify the answers?
- Which of the following is the most correct? A. In reference to the time value of money, the present value is always labeled as t=1 B. Negative MVAs indicate that a company's executives are managing the expenses well C. Nominal rates, or annual percentage rates, always equal the effective annual rate D. A strong ROE always indicates a strong year for a company E. Firms should generally try to minimize their days' sales outstanding in order to access their receivables at fast rates.Which of the following represent diversifiable risks? the president of a company suddenly resigns the economy goes into a recessionary period a company's product is recalled for defects the Federal Reserve unexpectedly changes interest rates Group of answer choices 2 and 4 only 1, 2, and 3 only 1, 2, and 4 only 1, 2, 3, and 4 1 and 3 onlyCompanies often try to keep accounting earnings growing at a relatively steady pace, thereby avoiding large swings in earnings from period to period. They also try to meet earnings targets. To do so, they use a variety of tactics. The simplest way is to control the timing of accounting revenues and costs, which all firms can do to at least some extent. For example, if earnings are looking too low this quarter, then some accounting costs can be deferred until next quarter. This practice is called earnings management. It is common, and it raises a lot of questions. Why do firms do it? Why are firms even allowed to do it under GAAP? Is it ethical? What are the implications for cash flow and shareholder wealth?
- Suppose you have noticed that the slope of the corporate yield curve has become steeperover the past few months. What factors might explain the change in the slope?Kerrigan Corporation announced on November 1, 2021 that company's CEO has been terminated and that James McCabe will become the company's new CEO. Kerrigan has had decreasing income over the last several of years. McCabe will be responsible for improving Kerrigan's future performance. What earnings management technique will the company probably utilize as a result of hiring a new CEO? Question 30 options: a) Increase cookie jar reserves b) Big Bath c) Accelerate current period revenues into future periods d) Accelerating future period expenses into the current periodDuring the great recession, under the Obama administration, business analysts in the financial industry were busy using financial-statement ratios and other mathematical models to do a stress tests, so as to determine if companies were deserving of government bailouts. The Dupont and Altman's z-score models were widely used during that period of economic stress. Required 1. Based on the elements in the Dupont Model, discuss how useful is that model in determining how well a company is doing. Scaffolding Hint: For example, if results from calculating the "Current Ratio" is greater than or equal to 2.00, it shows that the company is doing well financially. 2. Research and discuss how useful is the (a) Dupont ratio and (b) Altman's z-score model, based on the elements that make up the ratio (equation).
