MGT 201 Financial Management - Chapter 5
Long Term Liabilities: Also, called Discretionary Financing
Current Assets Generally grow in proportion to Sales
Fixed Assets Do not always grow in proportion to Sales
Current Liabilities also called Spontaneous Financing
Discretionary Financing grow in proportion to Sales
Marketable securities
Accounts receivable
Prepaid expenses
Inventory
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Marketable securities
Accounts receivable
Prepaid expenses
Inventory
Accounts payable
Short term portion of long term liabilities
Loan taken from bank for 2 years
Accrued expenses
[Current assets for the current year/Current sales] x Estimated sales for the next year
[Current sales/Current assets for the current year/] x Estimated sales for the next year
[Current assets for the current year/Current sales] x Last year sales
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Retained earnings
Net profit
Total invested profit
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True
False
Pay out ratio
Plow back ratio
Profit margin ratio
Retained earning
Retained earning
Earning per share
Pay out ratio
Profit margin ratio
Profit margin=net income/sales
Profit margin=Net sales/net income
Profit margin= Total income/sales
Profit margin= Total sales - total expenses
Estimated total assets –estimated total liabilities- estimated total equity
Estimated total assets –estimated total liabilities +estimated total equity
Estimated total liabilities- estimated total equity - estimated total assets
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True
False
Total equity / Net income
Net income/ total equity
Net profit / total equity
Net income / owner's equity
It is only a rough approximation
Change in fixed assets during the foretasted period will not yield very accurate answer
Lumpy assets are not taken into account
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Not all assets can be purchased or acquired in bits and pieces
Assests that cannot be acquired in small increments
Must be obtained in large, discrete units
Buying of half a plant one year, and another half several years later is example of lumpy assets
True
False
True
False
True
False
=CCF X {[(1+i/m)^nxm -1]/ (i/m)}
=CCF X {[(1+i/m)^nxm -1]/ i}
=CCF X {[(1+i)^n -1]/ (i)}
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=CCF X {[(1+i/m)^nxm -1]/ (i/m)}
=CCF X {[(1+i/m)^nxm -1]/ i}
=CCF X {[(1+i)^n -1]/ (i)}
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First calculate the future value of annuity and then Present value
First Calculate Present value of annuity then Future value
Calculate only future value of annuity
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True
False
True
False
200,000
2,000,000
20,000,000
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