C214 Final Exam Question
(2025/2026) QUESTIONS AND
(elaborated) ANSWETRS WITH
COMPLETE SOLUTIONS
Coupon Rate - The interest rate that a company promises to pay on bonds
Market Rate - The interest rate on other comparable bonds
Par Value - The amount payable on maturity of the bond
Market rate - Same as YTM - Yield to Maturity
Gordon Growth Model - Assumes stable growth rates and does not incorporate risk
CAPM Model - Allows to determine expected return on stocks and incorporates risk
How do public companies maximize shareholder value? - By maximizing Earnings Per Share
How do private companies maximize shareholder value? - By keeping control within the
company
, Positive credit rating has what effect on capital? - Lowers cost of capital
What is cash flow from operating activities? - It is cash flow generated for sale of products
and services
What is the formula for retained earnings? - Ending retained earnings=Beginning retained
earnings + Net Income = Dividends
Is depreciation and salvage value on an asset precise or is it an estimate? - It is an estimate
What is an example of accounting difference - Companies using different accounting
methods
What is an example of a timing difference? - Companies using different fiscal years
Do stock holders or bond holders have voting rights? - Stock holders have voting rights
What factors are considered for the initial outlay of a new investment? - Purchase price of
new equipment, shipping costs, and investment in working capital
What is the risk associated with debt financing? - Too much debt can lead to bankruptcy
What are inventory related costs? - Product costs, storage costs, and opportunity costs
What statements are required to be filed with the SEC - Annual audited financial statements
(2025/2026) QUESTIONS AND
(elaborated) ANSWETRS WITH
COMPLETE SOLUTIONS
Coupon Rate - The interest rate that a company promises to pay on bonds
Market Rate - The interest rate on other comparable bonds
Par Value - The amount payable on maturity of the bond
Market rate - Same as YTM - Yield to Maturity
Gordon Growth Model - Assumes stable growth rates and does not incorporate risk
CAPM Model - Allows to determine expected return on stocks and incorporates risk
How do public companies maximize shareholder value? - By maximizing Earnings Per Share
How do private companies maximize shareholder value? - By keeping control within the
company
, Positive credit rating has what effect on capital? - Lowers cost of capital
What is cash flow from operating activities? - It is cash flow generated for sale of products
and services
What is the formula for retained earnings? - Ending retained earnings=Beginning retained
earnings + Net Income = Dividends
Is depreciation and salvage value on an asset precise or is it an estimate? - It is an estimate
What is an example of accounting difference - Companies using different accounting
methods
What is an example of a timing difference? - Companies using different fiscal years
Do stock holders or bond holders have voting rights? - Stock holders have voting rights
What factors are considered for the initial outlay of a new investment? - Purchase price of
new equipment, shipping costs, and investment in working capital
What is the risk associated with debt financing? - Too much debt can lead to bankruptcy
What are inventory related costs? - Product costs, storage costs, and opportunity costs
What statements are required to be filed with the SEC - Annual audited financial statements
