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MGMT 310 Final Exam Study Guide

by: Ashley Maggioli

MGMT 310 Final Exam Study Guide MGMT 310

Marketplace > Purdue University > Music > MGMT 310 > MGMT 310 Final Exam Study Guide
Ashley Maggioli
GPA 3.6
Financial Management
Ryan Umbeck

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About this Document

This is the study guide that I completed for the MGMT 310 Final Exam last Fall 2014
Financial Management
Ryan Umbeck
Study Guide
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This 4 page Study Guide was uploaded by Ashley Maggioli on Monday February 2, 2015. The Study Guide belongs to MGMT 310 at Purdue University taught by Ryan Umbeck in Fall2014. Since its upload, it has received 327 views. For similar materials see Financial Management in Music at Purdue University.


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Date Created: 02/02/15
MGMT 310 Final Exam Study Guide Business Structures Sole proprietorship difficult to transfer ownership Unlimited liability Partnership difficult to transfer ownership Corporation double taxation Corporate income amp shareholder dividends are taxed Limited liability Easy to transfer ownership The balance sheet 0 Liquidity ease of conversion to the medium of exchange loss of value IRA individual retirement account not liquid lose value if money is taken out early 0 The income statement Sales COGS Other Expenses Deprecition EBIT Earning before interest amp taxes Interest Expense EBT earnings before taxes Taxes government pays some of your interest expense one debt tax shield average tax rate tax billtaxable income marginal tax rate tax on new money 0 Cash Flow 0 Sources and Uses of Cash sources Increase in liabilities decrease in assets uses decrease in liabilities increase in assets creditors get paid first Ratio Analysis short term solvency gt looking liquidity 12mths or less current ratio CACL quick ratio CAInvCL Inventory Turnover COGSinventory Receivables turnover SalesAccounts Receivable Return on Equity Profit Margin Net incomesales Asset Turnover SalesAssets Equity Multiplier AssetsTotal Equity Present Value PV FV1r t Future Value FV PVlrquott 0 Multiple cash ows Present value and future value 0 Annuities Perpetuity P Cr annuity Bonds high risk high interest rate Face Value 1000 or otherwise stated Gov39t bonds low risk low return rate interest payment are not state taxed zero coupon no coupon payments pure discount loan Bond Valuation Bond Price Face Valuelrquott C1l1rquottr Discount Bond Bond Price lt Face Value rc lt YTM Premium Bond Bond Price gt Face Value rc gt YTM r R h r real interest rate R nominal interest rate h in ation Factors of Bond Yield 1 more years of a bond increased risk 2 lower intermediate payment coupon payments increased risk 0 Dividends Dt D01gAt Dividend Yield g Dividend Yield Pt1Pt newoldold 0 Stock Valuation Discounted Cash ow method assume all companies pay dividends assume all dividends go on forever Zero Growth P0 D1r Perpetuity Constant Growth Pt Dtl rg non constant growth no pattern multiple cash ows individually take back to PV Capital Gain gain from stock price change in price Capital Gains Yield D1P0 Investment Income 0 Risk Premium risk premium the return you expect When you invest on a risky investment risk premium Er rf excess return 0 Risk risk volatility standard deviation how far away form the average you can be uctuation of prices increase in standard deviation increase risk of asset systematic risk market risk gt macroeconomic events unemployment GDP in ation foreign policy unsystematic risk firm risk gt microeconomic events one firm or a group of firms Beta Beta risk average 1 Payback period 0 Discounted payback period 0 Internal Rate of Return NPV NPV looks better With risky investment Incremental Cash Flow 0 Cost of Equity Re RE DlP0 g gt ignores risk RE rf Betarm rf security market line approach takes return form market amp What the risky asset should return to me rf risk free rate rm rf market risk premium rm market return 0 Cost of Debt RD RD YTM pretax cost of debt 0 Capital Structure Weights WACC 0 Financial Planning Elements of financial planning 1 fixed assets gt sales forecast 2 degree of financial leverage 3 cash paid to shareholders 4 liquidity requirements Internal Growth rate gives us the maximum sales forecast a company can do with internal funding EFN Difference on pro forma balance sheet between total assets amp total liabilities amp OE 1 short term debt 2 long term debt 3 equity 0 Raising Capital Life Cycle of Funding for a firm 1 Friends amp Family funds brand new companies pros cheap amp easy to find 2 angel investors individuals who are nonfamilyfriends who contribute substantial funds wealthy individuals pro lower rate of return 3 Venture Capital funds developed ideas that are not yet turning a profit split into 3 stages seed early amp late VC a company these are companies that just want to invest into something get in control of the start up company take a lot of equity 4 Initial Public Offering IPO firm goes public funds companies that are already turning g a profit or are otherwise well established takes place between companies amp investorsonly time that a company make money off of selling their stock 5 seasoned offerings funds firms that are already public that need extra equity capital Venture Capital make money through equity private financing for relatively new businesses in exchange for equity not a silent partner usually entails hands on guidance their main goal is to take a company public short term investors 35 years exit strategy sell stock equity


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