MGT 181 MIDTERM CH 1-7 QUESTIONS
How to calculate EBIT - Answer -EBIT = Sales - CoGS - OpEx - Depreciation
How to calculate Taxable Income - Answer -Taxable Income = EBIT - Interest
Rule of 72 - Answer -The number of years it takes for a certain amount to double in
value is equal to 72 divided by its annual rate of interest.
72 = (N to double value)(Interest as whole number)
How to calculate the Present Value for Preferred Stock - Answer -Present Value for
Preferred Stock = Dividend/Rate of Return
What are Discount and Premium Bonds? - Answer -Discount Bonds = Market Value <
Face Value ($1000) AND YTM > Coupon Rate
Premium Bonds = Market Value > Face Value ($1000) AND YTM < Coupon Rate
Define Working Capital - Answer -Working Capital: Working Capital is the Current
Assets minus Current Liabilities, which describes the amount of capital that a business
has to spend.
What is the agency problem? - Answer -The Agency problem: Conflict of interest
between managers and stockholders of a firm.
What are Primary Markets? - Answer -Primary Markets: A transaction where the
corporation sells securities to raise money for itself.
What are Secondary Markets? - Answer -Secondary Markets: A transaction where one
owner sells to another, transferring ownership of securities
What is Operating Cash Flow? - Answer -Operating Cash Flow: Earnings before
interest and taxes plus depreciation value minus taxes.
What is Marginal Tax Rate? - Answer -Marginal Tax Rate: The amount payable to
taxes on next dollar earned.
What is Average Tax Rate? - Answer -Average Tax Rate: Total taxes divided by total
taxable income, representing how much of a corporation's income is paid to taxes.
What is depreciation? - Answer -Depreciation: An accounting practice that separates
the reduction of the value of a long-term asset over time, as the asset is used up.
What 2 job titles generally report to the Vice President of Finance and what are their
roles in the Corporation? - Answer -The Tresurer, who manages cash and credit, and
plans finances and capital expenditures,
How to calculate EBIT - Answer -EBIT = Sales - CoGS - OpEx - Depreciation
How to calculate Taxable Income - Answer -Taxable Income = EBIT - Interest
Rule of 72 - Answer -The number of years it takes for a certain amount to double in
value is equal to 72 divided by its annual rate of interest.
72 = (N to double value)(Interest as whole number)
How to calculate the Present Value for Preferred Stock - Answer -Present Value for
Preferred Stock = Dividend/Rate of Return
What are Discount and Premium Bonds? - Answer -Discount Bonds = Market Value <
Face Value ($1000) AND YTM > Coupon Rate
Premium Bonds = Market Value > Face Value ($1000) AND YTM < Coupon Rate
Define Working Capital - Answer -Working Capital: Working Capital is the Current
Assets minus Current Liabilities, which describes the amount of capital that a business
has to spend.
What is the agency problem? - Answer -The Agency problem: Conflict of interest
between managers and stockholders of a firm.
What are Primary Markets? - Answer -Primary Markets: A transaction where the
corporation sells securities to raise money for itself.
What are Secondary Markets? - Answer -Secondary Markets: A transaction where one
owner sells to another, transferring ownership of securities
What is Operating Cash Flow? - Answer -Operating Cash Flow: Earnings before
interest and taxes plus depreciation value minus taxes.
What is Marginal Tax Rate? - Answer -Marginal Tax Rate: The amount payable to
taxes on next dollar earned.
What is Average Tax Rate? - Answer -Average Tax Rate: Total taxes divided by total
taxable income, representing how much of a corporation's income is paid to taxes.
What is depreciation? - Answer -Depreciation: An accounting practice that separates
the reduction of the value of a long-term asset over time, as the asset is used up.
What 2 job titles generally report to the Vice President of Finance and what are their
roles in the Corporation? - Answer -The Tresurer, who manages cash and credit, and
plans finances and capital expenditures,
