HM 435 Final Exam Latest Update
Investment
Financing
Dividend - ANSWER What are the three financial decisions
investment and financing decisions - ANSWER Balance sheet is a result of what
decisions
Investment decision - ANSWER Assets (Building, Property and Equipment) are the result
of what decision
Financing Decision - ANSWER Liabilities and equities are the result of what decision
(debt instruments and equities)
Debt
Equity - ANSWER What are the two categories of Financial Capital
Debt - ANSWER provided by the creditors or lenders (bank) to the company
Equity - ANSWER provided by the owners of the company (management and investors)
Debt - ANSWER What is a legally protected prior claim to the income and assets of the
hotel/restaurant entity
Equity - ANSWER residual claimants to income and assets of the entity
Common stock - ANSWER voting rights, can receive dividends
Preferred Stock - ANSWER priority position for dividends, no voting rights, fixed
dividend
Bonds (debt) - ANSWER paid interest before stockholders, limited influence on
corporation
repurchased by company for a certain price - ANSWER What does it mean that
Preferred stock is often callable
every 6 months
original amount the company borrowed when note matures (principal) - ANSWER How
often do bondholders receive interest payments and how much
stock price is the sum of present and future dividends - ANSWER What affects the stock
price
, -timing of the future dividends
-magnitude of the future dividends
-riskiness of the future dividends - ANSWER What major factors determine owners value
(stock price)
a principal and an agent - ANSWER What do agency relationships involve
-occur when an agent does not act in the best interests of the principal
-ex: excessive salary/benefits to management team - ANSWER What is an agency
problem and when do they occur
-Performance-based compensation
-Boards of Directors
-Threat of Takeover - ANSWER What are mechanisms to minimize Potential Agency
Problems
salary and bonus structures, equity accumulation program, stock option - ANSWER
Examples of performance based management compensation programs
greater - ANSWER The higher that the value of the firm increases (stock price) the
__________ the manager's compensation
option for management to purchase stock in the future at a price set today - ANSWER
Stock Option program
financial position of business at a point in time (date)
- Assets= Liabilities and Equity
- reflects the investment, financing and dividend decisions - ANSWER Balance Sheet
current assets
investments
property and equipment
current liabilities
LTD
Owners Equity - ANSWER Whats on a balance sheet
Revenue and Expenses for a period of time
Level of detail dependent on user - ANSWER Income Statement
Investment
Financing
Dividend - ANSWER What are the three financial decisions
investment and financing decisions - ANSWER Balance sheet is a result of what
decisions
Investment decision - ANSWER Assets (Building, Property and Equipment) are the result
of what decision
Financing Decision - ANSWER Liabilities and equities are the result of what decision
(debt instruments and equities)
Debt
Equity - ANSWER What are the two categories of Financial Capital
Debt - ANSWER provided by the creditors or lenders (bank) to the company
Equity - ANSWER provided by the owners of the company (management and investors)
Debt - ANSWER What is a legally protected prior claim to the income and assets of the
hotel/restaurant entity
Equity - ANSWER residual claimants to income and assets of the entity
Common stock - ANSWER voting rights, can receive dividends
Preferred Stock - ANSWER priority position for dividends, no voting rights, fixed
dividend
Bonds (debt) - ANSWER paid interest before stockholders, limited influence on
corporation
repurchased by company for a certain price - ANSWER What does it mean that
Preferred stock is often callable
every 6 months
original amount the company borrowed when note matures (principal) - ANSWER How
often do bondholders receive interest payments and how much
stock price is the sum of present and future dividends - ANSWER What affects the stock
price
, -timing of the future dividends
-magnitude of the future dividends
-riskiness of the future dividends - ANSWER What major factors determine owners value
(stock price)
a principal and an agent - ANSWER What do agency relationships involve
-occur when an agent does not act in the best interests of the principal
-ex: excessive salary/benefits to management team - ANSWER What is an agency
problem and when do they occur
-Performance-based compensation
-Boards of Directors
-Threat of Takeover - ANSWER What are mechanisms to minimize Potential Agency
Problems
salary and bonus structures, equity accumulation program, stock option - ANSWER
Examples of performance based management compensation programs
greater - ANSWER The higher that the value of the firm increases (stock price) the
__________ the manager's compensation
option for management to purchase stock in the future at a price set today - ANSWER
Stock Option program
financial position of business at a point in time (date)
- Assets= Liabilities and Equity
- reflects the investment, financing and dividend decisions - ANSWER Balance Sheet
current assets
investments
property and equipment
current liabilities
LTD
Owners Equity - ANSWER Whats on a balance sheet
Revenue and Expenses for a period of time
Level of detail dependent on user - ANSWER Income Statement
