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This is an odd assignment. Below there are 8 units listed and under each unit there are discussion questions. The assignment is to write about a page (about 275 words) per unit. If this can be done only answering one of the questions that’s good. If it requires two or three short answers to multiple questions that’s good too. Sources are required and must be cited for each individual unit. Please contact me with any questions.
Unit 1***
1. Use the list of possible goals of financial management listed in the book, suggest some other possible goals. Can you also identify potential problems of those goals?
2. The more general goal of financial management is to maximize the market value of owners’ equity. However, this doesn’t mean that firms can do “anything” to maximize stockholder wealth. Unethical behavior does not ultimately benefit owners.
3. Find some examples to discuss any ethical issue. For example: the issue of responsibility of the managers and stockholders of tobacco firms, the antitrust case against Microsoft and etc.
Unit 2***
1. Why are market values generally more important for the decision making process? Give an example or two of familiar instances to make the point.
2. Publicly traded firms have to file audited annual reports, but that doesn’t mean that “accounting irregularities” never slip by the auditors. Companies that deliberately manipulate financial statements may benefit in the short run, but it eventually comes back to haunt them. Name one or two companies in the real world as examples and tell us some stories.
Unit 3***
1. Financial ratios are “red flags” that a good analyst will use to determine what needs to be investigated further. For example, suppose a firm’s average collection period (days’ sales in receivables) is significantly higher than the industry norm. What questions might you ask?
2. Financial information in widely available on internet. However, not everything online is credible. In general, how do you extract financial information online? Do you have any experience obtaining false or misleading information there?
Unit 4***
1. What is your understanding of Financial Planning? Why do we need Financial Planning?
2. Why managers would wish to avoid issuing equity to meet anticipated financing needs?
3. Should managers overstate budget requests (or growth projections) if they know that central headquarters is going to cut funds across the board?
Unit 5***
1. What is the relationship between present value and future value?
2. What is the difference between simple interest and compound interest?
3. What are some situations in which you might want to know the implied interest rate?
4. When might you want to compute the number of periods?
Unit 6***
1. If you ran a bank, which rate would you rather advertise on monthly-compounded loans, the effective annual rate or the annual percentage rate? Which rate would you rather advertise on quarterly-compounded savings accounts, the effective annual rate or the annual percentage rate? Explain. As a consumer, which would you prefer to see and why?
2. Should lending laws be changed to require lenders to report the effective annual rate rather than the annual percentage rate?
Unit 7***
1. The discussion of asset pricing in the text suggests that an investor will be indifferent between two bonds which have equal yields to maturity as long as they have equivalent default risk. Can you think of any real-world factors which might make a given investor prefer one of these bonds over the other?
2. Assume you are the manager of a $100 million portfolio of corporate bonds and you believe interest rates will fall. What adjustments should you make to your portfolio based on your beliefs?
Unit 8***
1. A number of publicly traded firms pay no dividends yet investors are willing to buy shares in these firms. How is this possible? Does this violate our basic principle of stock valuation?
2. Explain whether it is easier to find the required return on a publicly traded stock or a publicly traded bond, and why?
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