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IF You Face Any Problem Then E Mail Us At JOHNMATE1122@GMAIL.COM FIN 571 Complete Week 3 – NEW FIN 571 Week 3 DQ 1 NEW The LongTerm funding strategy relies on longterm debt to finance both capital assets and working capital. As a result, this strategy reduces risk since there is no need to consider refinancing assets since all funding is long term. How would a ‘changing rate environment’ impact the use of this strategy? FIN 571 Week 3 DQ 2 NEW Managers must think not only in terms of a tradeoff or a pecking order theories but remain concerned with how their financing decisions will influence the practical issues that they must deal with when managing a business. Financial flexibility is an important consideration in many capital structure decisions. As you pointed out, managers must ensure that they retain sufficient financial resources in the firm to take advantage of unexpected opportunities as well as unforeseen problems. They try to manage their firms’ capital structures in a way that limits the risk to a reasonable level. How can managers use leverage and control to support their capital structure decisions? FIN 571 Week 3 DQ 3 NEW Short term funding strategy involves various sources of shortterm financing such as: Accounts payable (trade credit), bank loans, and commercial paper are common sources of shortterm financing. Accounts payable constituted about 35 percent of total current liabilities for all publicly traded manufacturing firms. The buyer needs to figure out whether it makes YOU CAN ALSO VISIT: WWW.HWSPEED.COM
financial sense to pay early and take advantage of the discount or to wait and pay in full when the account is due. Shortterm bank loans accounted for about 20 percent of total current liabilities for all publicly traded manufacturing firms. An informal line of credit is a verbal agreement between the firm and the bank, allowing the firm to borrow up to an agreedupon upper limit. In exchange for providing the line of credit, a bank may require that the firm holds acompensating balance with them. What are some other sources of shortterm financing used with this strategy? FIN 571 Week 3 Individual Interpreting Financial Results NEW Resource: Financial Statements for the company assigned by your instructor in Week 2. Review the assigned company’s financial statements from the past three years. Calculate the financial ratios for the assigned company’s financial statements, and then interpret those results against company historical data as well as industry benchmarks:
Compare the financial ratios with each of the preceding three (3) years (e.g. 2014 with 2013; 2013 with 2012; and 2012 with 2011).
Compare the calculated financial ratios against the industry benchmarks for the industry of your assigned company. Write a 500 to 750 word summary of your analysis. Show financial calculations where appropriate. Click the Assignment Files tab to submit your assignment. FIN 571 Week 3 Learning Team Reflection NEW Watch the “Concept Review Video: Working Capital Management” video located in theWileyPLUS Assignment: Week 3 Videos Activity. Discuss strategies these business owners used to manage their working capital. Write a 350700 word summary of your discussion.
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Click the Assignment Files tab to submit your assignment. FIN 571 Week 3 WileyPLUS Practice Quiz NEW Multiple Choice Question 32 The operating cycle ends not with the finished goods being sold to customers and the cash collected on the sales; but when you take into account the time taken by the firm to pay for its purchases. To measure operating cycle we need another measure called the days’ payables outstanding. begins when the firm receives the raw materials it purchased that would be used to produce the goods that the firm manufactures. begins when the firm uses its cash to purchase raw materials and ends when the firm collects cash payments on its credit sales. Multiple Choice Question 57 You are provided the following working capital information for the Ridge Company:
Ridge Company Account
Cost of goods sold
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Operating cycle: What is the operating cycle for Ridge Company? 51 days 47 days 85 days 36 days Multiple Choice Question 80 Ticktock Clocks sells 10,000 alarm clocks each year. If the total cost of placing an order is $65 and it costs $85 per year to carry the alarm clock in inventory, use the EOQ formula to calculate the optimal order size. 26,154 clocks 24 clocks 15,294 clocks 161 clocks Multiple Choice Question 49 The asset substitution problem occurs when managers substitute less risky assets for riskier ones to the detriment of equity holders. managers substitute riskier assets for less risky ones to the detriment of bondholders. managers substitute less risky assets for riskier ones to the detriment of bondholders. managers substitute riskier assets for less risky ones to the detriment of equity holders. Multiple Choice Question 53 M&M Proposition 1: Dynamo Corp. produces annual cash flows of $150 and is expected to exist forever. The company is currently financed with 75 percent equity YOU CAN ALSO VISIT: WWW.HWSPEED.COM
and 25 percent debt. Your analysis tells you that the appropriate discount rates are 10 percent for the cash flows, and 7 percent for the debt. You currently own 10 percent of the stock. How much are your cash flows today? $4.50 $12.38 $150 $15 Multiple Choice Question 62 M&M Proposition 2: Melba’s Toast has a capital structure with 30% debt and 70% equity. Its pretax cost of debt is 6%, and its cost of equity is 10%. The firm’s marginal corporate income tax rate is 35%. What is the appropriate WACC? 6.35% 7.44% 8.80% 8.17% Multiple Choice Question 39 According to the text, the financial plan covers a period of ten years. none of these. one year. three to five years. Multiple Choice Question 45 The financing plan of a firm will indicate the firm’s dividend policy, the desired capital structure for the firm, and the firm’s working capital policy. YOU CAN ALSO VISIT: WWW.HWSPEED.COM
the dollar amount of funds that has to be raised externally and the sources of funds available to the firm, the desired capital structure for the firm, and the firm’s dividend policy. the dollar amount of funds that has to be raised externally and the sources of funds available to the firm, the desired capital structure for the firm, and the firm’s working capital policy. the dollar amount of funds that has to be raised externally and the sources of funds available to the firm, the firm’s dividend policy, and the firm’s working capital policy. Multiple Choice Question 74 Payout and retention ratio: Tradewinds Corp. has revenues of $9,651,220, costs of $6,080,412, interest payment of $511,233, and a tax rate of 34 percent. It paid dividends of $1,384,125 to shareholders. Find the firm’s dividend payout ratio and retention ratio. 25%, 75% 66%, 34% 34%, 66% 69%, 31%
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