理财英文

某公司理财名词解释习题英文版）

CONCEPTQUESTIONS-CHAPTER1

1.1?Whatarethethreebasicquestionsofcorporatefinance?

mentdecision(capitalbudgeting):Whatlong-term

investmentstrategy

shouldafirmadopt?

ingdecision(capitalstructure):Howmuchcash

mustberaidforthe

requiredinvestments?

-termfinancedecision(workingcapital):Howmuch

short-termcash

flowdoescompanyneedtopayitsbills.

Describecapitalstructure.

Capitalstructureisthemixofdifferentcuritiesudto

financeafirm's

investments.

Listthreereasonswhyvaluecreationisdifficult.

Valuecreationisdifficultbecauitisnoteasytoobrve

cashflowsdirectly.

Thereasonsare:

owsaresometimesdifficulttoidentify.

ingofcashflowsisdifficulttodetermine.

owsareuncertainandthereforerisky.

1.2?Whatisacontingentclaim?

Acontingentclaimisaclaimwhopayoffsaredependent

onthevalueofthe

generalterms,contingent

claimsdependon

thevalueofanunderlyingast.

Describeequityanddebtascontingentclaims.

valueofthefirmis

greaterthantheamountowedtodebtholders,theywillget

whatthefirmowes

them,he

valueofthefirmis

lessthanequity,bondholderswillgetthevalueofthefirm

andequityholders

nothing.

1.3?Defineaproprietorship,apartnershipandacorporation.

Aproprietorshipisabusinessownedbyasingleindividual

withunlimited

ershipisabusinessownedbytwoormore

individualswith

rationisabusinesswhichisa

"legalperson"with

manylimitedliabilityowners.

Whataretheadvantagesofthecorporateformofbusiness

organization?

Limitedliability,eastofownershiptransferandperpetual

succession.

1.4?Whatarethetwotypesofagencycosts?

Monitoringcostsoftheshareholdersandtheincentivefees

paidtothemanagers.

Howaremanagersbondedtoshareholders?

oldersdeterminethemembershiptotheboardof

directors,which

lectsmanagement.

mentcontractsandincentivesarebuildinto

compensation

arrangements.

mistakenoverbecauthefirm'spricedropped,

managerscouldlo

theirjobs.

http://www..com/doc/,petitioninthe

manageriallabormarketmakesmanagersperforminthe

bestinterestofstockholders.

Canyourecallsomemanagerialgoals?

Maximizationofcorporatewealth,growthandcompanysize.

Whatisthet-of-contractsperspective?

Theviewofthecorporationasatofcontracting

relationshipsamong

individualswhohaveconflictingobjectives.

1.5?Distinguishbetweenmoneymarketsandcapitalmarkets.

Moneymarketsaremarketsfordebtcuritiesthatpayoff

inlessthanoneyear,

whilecapitalmarketsaremarketsforlong-termdebtand

equityshares.

Whatislisting?

Listingreferstotheproceduresbywhichacompanyapplies

andqualifiessothatitsstockcanbetradedontheNewYork

StockExchange.

Whatisthedifferencebetweenaprimarymarketanda

condarymarket?

Theprimarymarketisthemarketwhereissuersofcurities

llthemforthefirsttimetoinvestors,whileacondarymarket

isamarketforcuritiespreviously

issued.

CONCEPTQUESTIONS-CHAPTER2

2.1?Whatisthebalance-sheetequation?

Asts=Liabilities+Stockholders'equity

Whatthreethingsshouldbekeptinmindwhenlookingata

balancesheet?

Accountingliquidity,,.

2.2?Whatistheincomestatementequation?

Revenue-expens=Income

Whatarethethreethingstokeepinmindwhenlookingat

anincome

statement?

GenerallyAcceptedAccountingPrinciples(GAAP),noncash

items,andtimeandcosts.

Whatarenoncashexpens?

Noncashexpensareitemsincludedaxpensbutwhich

timportantoneis

depreciation.

2.3?Whatisnetworkingcapital?

Itisthedifferencebetweencurrentastsandcurrent

liabilities.

Whatisthechangeinnetworkingcapital?

Todeterminechangesinnetworkingcapitalyousubtract

usofnetworking

capitalfromsourcesofnetworkingcapital.

2.4?Howiscashflowdifferentfromchangesinnetworking

capital?

Thedifferencebetweencashflowandchangesinnew

workingcapitalisthat

sometransactionsaffectcashflowandnotnetworking

uisitionofinventorieswithcashisagood

exampleofachangeinworkingcapital

requirements.

Whatisthedifferencebetweenoperatingcashflowandtotal

cashflowofthefirm?

Themaindifferencebetweenthetwoiscapitalspendingand

additionstoworkingcapital,thatis,investmentinfixedasts

and"investment"TQUESTIONS-

CHAPTER3

3.1?Whatisaninterestrate?

Itisthepaymentrequiredbythelenderofmoneyfortheu

ofitduringa

presdinpercentage.

Whatareinstitutionsthatmatchborrowersandlenders

called?

Theyarecalledfinancialinstitutions.

Whatdowemeanwhenwesayamarketclears?Whatisan

equilibrium

rateofinterest?

Amarketclearsiftheamountofmoneyborrowerswantto

borrowiqualtothe

libriumrateofinterest

istheinterestrateatwhichmarketsclear.

3.2?Howdoesanindividualchangehisconsumptionacross

periodsthrough

borrowingandlending.

Byborrowingandlendingdifferentamountsthepersoncan

achieveanyofall

consumptionpossibilitiesavailable.

Howdointerestratechangesaffectone'sdegreeof

impatience?

Aperson'slevelofpatiencedependsupontheinterestrate

heorshefacesinthe

neagertoborrowmoneyatalowinterest

ratewillbecomeless

eagerifthatinterestrateisraidandmayprefertolend

moneytotakeadvantageofhigherinterestrates.

3.3?Whatisthemostimportantfeatureofacompetitive

financialmarket?

Noinvestor,individualorcorporationcanhaveasignificant

effectontotal

ore,investorsareprice

takers.

Whatconditionsarelikelytoleadtothis?

giscostless.

http://www..com/doc/,rmationabout

borrowingandlendingopportunitiesisavailable

remanytraders.

3.4?Describethebasicfinancialprincipleofinvestment

decision-making?

Aninvestmentprojectisworthundertakingonlyifitismores

desirablethanwhatisavailableinthefinancialmarkets.

3.5?Describehowthefinancialmarketscanbeudto

evaluateinvestment

alternatives?

propodinvestment

providesabetteralternativethanthefinancialmarkets,it

shouldbeundertaken.

Whatistheparationtheorem?Whyisitimportant?

Theparationtheoremsaysthatthedecisionastowhether

toundertakeaproject(comparedtothefinancialmarkets)is

independentoftheconsumption

portantbecauwecan

makeinvestment

decisionsbadonobjectivedata,disregardingpersonal

preferences.

3.6?Givethedefinitionsofnetprentvalue,futurevalue

andprentvalue?

Newprentvalueisthedifferenceinprentvalueterms

betweencashinflows

hefinancialmarket,thefuture

valueisanamount

equivalenttotheamountcurrentlyheld,andprentvalueis

theamount

equivalentnowtoanamounttobereceivedorgiveninthe

future.

Whatinformationdoesapersonneedtocomputean

investment'snetprentvalue?

Cashinflows,cashoutflowsandaninterestordiscountrate.

3.7?Intermsofthenet-prent-valuerule,whatisthe

esntialdifference

betweentheindividualandthecorporation.

Themaindifferenceisthatfirmshavenoconsumption

TQUESTIONS-CHAPTER4

4.1?Definefuturevalueandprentvalue.

Futurevalueisthevalueofasumafterinvestingoveroneor

moreperiods.

Prentvalueisthevaluetodayofcashflowstobereceived

inthefuture.

Howdoesoneunetprentvaluewhenmakingan

investmentdecision?

Onedeterminestheprentvalueoffuturecashflowsand

valueispositive,

theinvestmentshouldbeundertaken.

IftheNPVisnegative,thentheinvestmentshouldbe

rejected.

4.2?Whatisthedifferencebetweensimpleinterestand

compoundinterest?

Withsimpleinterest,theinterestontheoriginalinvestment

isnotreinvested.

Withcompoundinterest,eachinterestpaymentisreinvested

andoneearns

interestoninterest.

Whatistheformulaforthenetprentvalueofaproject?

T

NPV=-C0+∑Ct/(1+I)t

t=1

4.3?Whatisastatedannualinterestrate?

Thestatedannualinterestrateistheannualinterestrate

withoutconsiderationof

compounding.

Whatisaneffectiveannualinterestrate?

Aneffectiveannualinterestrateisaratethattakes

compoundingintoaccount.

Whatistherelationshipbetweenthestatedannualinterest

rateandthe

effectiveannualinterestrate?

Effectiveannualinterestrate=(1+(r/m))m-1.

Definecontinuouscompounding.

Continuouscompoundingcompoundsinvestmentvery

instant.

4.4?Whataretheformulasforperpetuity,growing-

perpetuity,annuity,and

growingannuity?

Perpetuity:PV=C/r

GrowingPerpetuity:PV=C/(r-g)

Annuity:PV=(C/r)[1-1/(1+r)T]

GrowingAnnuity:PV=[C/(r-g)][1-((1+g)/(1+r))T]

Whatarethreeimportantpointsconcerningthegrowing

perpetuityformula?

erator.

erestrateandthegrowthrate.

ingassumption.

Whatarefourtricksconcerningannuities?

edannuity.

ityinadvance

equentannuity

atingofprentvaluesoftwoannuities.

CONCEPTQUESTIONS-CHAPTER5

5.2?Definepurediscountbonds,level-couponbonds,and

consols.

Apurediscountbondisonethatmakesnointervening

-

couponbondisa

combinationofanannuityandalumpsumatmaturity.A

consolisabondthat

makesinterestpaymentsforever.

Contrastthestateinterestrateandtheeffectiveannual

interestrateforbondspayingmi-annualinterest.

Effectiveannualinterestrateonabondtakesintoaccount

twoperiodsof

compoundingperyearreceivedonthecouponpayments.

Thestateratedoesnot

takethisintoaccount.

5.3?Whatistherelationshipbetweeninterestratesandbond

prices?

egoesup,theother

goesdown.

Howdoesonecalculatetheyieldtomaturityonabond?

Onefindsthediscountratethatequatesthepromidfuture

cashflowswiththe

priceofthebond.

5.8?Whatarethethreefactorsdeterminingafirm'sP/Eratio?

'xpectationsoffuturegrowthopportunities.

countrte.

ountingmethod.

5.9?WhatistheclosingpriceofGeneralData?

TheclosingpriceofGeneralDatais63/16.

WhatisthePEofGeneralHou?

ThePEofGeneralHouis29.

WhatistheannualdividendofGeneralHost?

TheannualdividendofGeneralHostiszero.

CONCEPTQUESTIONS-AppendixtoChapter5

Whatisthedifferencebetweenaspotinterestrateandthe

yieldtomaturity?

Theyieldtomaturityisthegeometricaverageofthespot

ratesduringthelifeof

thebond.

Definetheforwardrate.

Givenaone-yearbondandatwo-yearbond,oneknowsthe

spotratesforboth.

Theforwardrateistherateofreturnimplicitonaone-year

bondpurchadinthecondyearthatwouldequatethe

terminalwealthofpurchasingtheone-year

bondtodayandanotherinoneyearwiththatofthetwo-

yearbond.

Whatistherelationshipbetweentheone-yearspotrate,the

two-yearspotrateandtheforwardrateoverthecondyear?

Theforwardratef2=[(1+r2)2/(1+r1)]-1

Whatistheexpectationhypothesis?

Investorstinterestratessuchthattheforwardrateovera

givenperiodequals

thespotrateforthatperiod.

Whatistheliquidity-preferencehypothesis?

Thishypothesismaintainsthatinvestorsrequirearisk

premiumforholding

longer-termbonds(efertobeliquidorshort-term

investors).This

impliesthatthemarkettstheforwardrateforagiven

periodabovetheexpectedspotrateforthatperiod.

CONCEPTQUESTIONS-CHAPTER6

6.2?Listtheproblemsofthepaybackperiodrule.

nottakeintoaccountthetimevalueofmoney.

respaymentsafterthepaybackperiod.

offperiodisarbitrary.

Whataresomeadvantages?

mpletoimplement.

elpincontrollingandevaluatingmanagers.

6.4?WhatarethethreestepsincalculatingAAR?

ineaveragenetincome.

ineaverageinvestment

averagenetincomebyaverageinvestment.

WhataresomeflawswiththeAARapproach?

accountingfigures.

snoaccountoftiming.

offperiodisarbitrary.

6.5?HowdoesonecalculatetheIRRofaproject?

Usingeithertrial-and-errororafinancialcalculator,onefinds

thediscountrate

thatproducesanNPVofzero.

6.6?Whatisthedifferencebetweenindependentprojects

andmutuallyexclusive

projects?

Anindependentprojectisonewhoacceptancedoesnot

llyexclusiveproject,on

theotherhandisonewhoacceptanceprecludesthe

acceptanceofanother.

WhataretwoproblemswiththeIRRapproachthatapplyto

bothindependentandmutuallyexclusiveprojects?

isionruledependsonwhetheroneisinvestingof

financing.

leratesofreturnarepossible.

Whataretwoadditionalproblemsapplyingonlytomutually

exclusiveprojects?

approachignoresissuesofscale.

approachdoesnotaccommodatethetimingofthe

cashflows

properly.

6.7?Howdoesonecalculateaproject'sprofitabilityindex?

Dividetheprentvalueofthecashflowssubquenttothe

initialinvestmentbytheinitialinvestment.

Howistheprofitabilityindexappliedtoindependent

projects,mutuallyexclusiveprojects,andsituationsofcapital

rationing?

dependentprojects,accepttheprojectifthePIis

greaterthan1.0and

rejectiflessthan1.0.

tuallyexclusiveprojects,uincrementalanalysis,

subtractingthe

Iis

greaterthan

1.0,than1.0,acceptproject

2.

talrationing,thefirmshouldsimplyranktheprojects

accordingtotheir

respectivePIsandaccepttheprojectswiththehighestPIs,

subjecttothe

budgetconstrain.

CONCEPTQUESTIONS-CHAPTER7

7.1?Whatarethethreedifficultiesindetermining

incrementalcashflows?

sts.

unitycosts

fects.

Definesunkcosts,opportunitycosts,andsideeffects.

stsarecoststhathavealreadybeenincurredand

thatwillnotbe

affectedbythedecisionwhethertoundertakethe

investment.

unitycostsarecostsincurredbythefirmbecau,

ifitdecidesto

undertakeaproject,itwillforegootheropportunitiesfor

usingtheasts.

fectsappearwhenaprojectnegativelyaffectscash

flowsfromother

partsofthefirm.

7.2?Whataretheitemsleadingtocashflowinanyyear?

Cashflowfromoperations(revenue-operatingcosts-taxes)

pluscashflowof

investment(costofnewmachines+changesinnetworking

capital+opportunitycosts).

WhydidwedetermineincomewhenNPVAnalysisdiscounts

cashflows,notincome?

Becauweneedtodeterminehowmuchispaidoutintaxes.

Whyisworkingcapitalviewedasacashoutflow?

Becauincreasinworkingcapitalmustbefundedbycash

generatedelwhereinthefirm.

7.3?Whatisthedifferencebetweenthenominalandthereal

interestrate?

Thenominalinterestrateistherealinterestratewitha

premiumforinflation.

Whatisthedifferencebetweennominalandrealcashflows?

Realcashflowsarenominalcashflowsadjustedforinflation.

7.4?Whatistheequivalentannualcostmethodofcapital

budgeting?

Thedecisionastowhichofvariousmutuallyexclusive

isdeterminedbydividingthenetprentvalueofcostsbyan

machinewiththelowestEACshouldbeacquired.

CanyoulisttheassumptionsthatwemusttouEAC?

hinesdothesamejob.

vedifferentoperatingcostsandlives

hinewillbeindefinitelyreplaced.

CONCEPTQUESTIONS-CHAPTER8

8.1?WhatarethewaysafirmcancreatepositiveNPV.

ttointroduceanewproduct.

rdevelopacorecompetencytoproductgoodsor

rvicesatlowercosts

thancompetitors.

abarrierthatmakesitdifficultfortheotherfirmsto

compete

effectively.

ucevariationonexistingproductstotakeadvantage

ofunsatisfied

demand

productdifferentiationbyaggressiveadvertising

andmarketing

networks.

http://www..com/doc/,einnovationin

organizationalprocesstodoalloftheabove.

Howcanmanagersuthemarkettohelpthemscreenout

negativeNPVprojects?

8.2?Whatisadecisiontree?

Itisamethodtohelpcapitalbudgetingdecision-makers

evaluatingprojects

ypointinthetree,

therearedifferent

alternativesthatshouldbeanalyzed.

Whatarepotentialproblemsinusingadecisiontree?

Potentialproblems1)thatadifferentdiscountrateshouldbe

udfordifferent

branchesinthetreeand2)itisdifficultfordecisiontreesto

capturemanagerial

options.

8.3?Whatisansitivityanalysis?

Itisatechniqueudtodeterminehowtheresultofa

decisionchangeswhen

someoftheparametersorassumptionschange.

Whyisitimportanttoperformansitivityanalysis?

Becauitprovidesananalysisoftheconquencesof

possiblepredictionor

assumptionerrors.

Whatisabreak-evenanalysis?

Itisatechniqueudtodeterminethevolumeofproduction

necessarytobreak

even,thatis,tocovernotonlyvariablecostsbutfixedcosts

aswell.

Describehownsitivityanalysisinteractswithbreak-even

analysis.