C214 Final Exam Questions
Coupon Rate - ANSThe interest rate that a company promises to pay on bonds
Market Rate - ANSThe interest rate on other comparable bonds
Par Value - ANSThe amount payable on maturity of the bond
Market rate - ANSSame as YTM - Yield to Maturity
Gordon Growth Model - ANSAssumes stable growth rates and does not incorporate risk
CAPM Model - ANSAllows to determine expected return on stocks and incorporates risk
How do public companies maximize shareholder value? - ANSBy maximizing Earnings Per
Share
How do private companies maximize shareholder value? - ANSBy keeping control within the
company
Positive credit rating has what effect on capital? - ANSLowers cost of capital
What is cash flow from operating activities? - ANSIt is cash flow generated for sale of products
and services
What is the formula for retained earnings? - ANSEnding retained earnings=Beginning retained
earnings + Net Income = Dividends
Is depreciation and salvage value on an asset precise or is it an estimate? - ANSIt is an
estimate
What is an example of accounting difference - ANSCompanies using different accounting
methods
What is an example of a timing difference? - ANSCompanies using different fiscal years
Do stock holders or bond holders have voting rights? - ANSStock holders have voting rights
What factors are considered for the initial outlay of a new investment? - ANSPurchase price of
new equipment, shipping costs, and investment in working capital
What is the risk associated with debt financing? - ANSToo much debt can lead to bankruptcy
Coupon Rate - ANSThe interest rate that a company promises to pay on bonds
Market Rate - ANSThe interest rate on other comparable bonds
Par Value - ANSThe amount payable on maturity of the bond
Market rate - ANSSame as YTM - Yield to Maturity
Gordon Growth Model - ANSAssumes stable growth rates and does not incorporate risk
CAPM Model - ANSAllows to determine expected return on stocks and incorporates risk
How do public companies maximize shareholder value? - ANSBy maximizing Earnings Per
Share
How do private companies maximize shareholder value? - ANSBy keeping control within the
company
Positive credit rating has what effect on capital? - ANSLowers cost of capital
What is cash flow from operating activities? - ANSIt is cash flow generated for sale of products
and services
What is the formula for retained earnings? - ANSEnding retained earnings=Beginning retained
earnings + Net Income = Dividends
Is depreciation and salvage value on an asset precise or is it an estimate? - ANSIt is an
estimate
What is an example of accounting difference - ANSCompanies using different accounting
methods
What is an example of a timing difference? - ANSCompanies using different fiscal years
Do stock holders or bond holders have voting rights? - ANSStock holders have voting rights
What factors are considered for the initial outlay of a new investment? - ANSPurchase price of
new equipment, shipping costs, and investment in working capital
What is the risk associated with debt financing? - ANSToo much debt can lead to bankruptcy
