Finance Questions

I’m trying to learn for my Business class and I’m stuck. Can you help?

Attached questions for finance class, Each bullet is a new question

  • The industrial group HEEMS shows a net result, 80% of which is from extraordinary income. State your views.
  • Which approach to the balance sheet should you adopt: ◦ ◦ when giving a warranty on the balance sheet of a company
  • being sold? when forecasting a company’s working capital?
  • Is it better to make a small percentage on a very large amount or a large percentage on a small amount?
  • In a growing company, would you expect margins to grow or to decrease?
  • Is operating cash flow an accounting profit?
  • Why will vertical integration be dismissed as being of little value after an analysis of the value chain?
  • Explain why, during a recession, working capital will decline at a slower pace than sales.
  • If the purchase price of an investment is positive and all subsequent cash flows are positive, show how there can only be a single yield to maturity.
  • Why break down contributions made by associate companies into operating, financial and non-recurring items?
  • Do investments always take the form of capex?
  • Give examples of businesses with negative working capital.
  • What are the strengths of a trend analysis?
  • The industrial group VAN DAM shows a net result, 80% of which is from its financial income. State your views.
  • Give a synonym for net assets.
  • Do you believe that Internet retail businesses carry high working capital?
  • Why does the financial expense/EBITDA ratio play such a fundamental role in scoring techniques?
  • Does the interest rate depend on when cash flows occur?
  • You are appointed financial director of a cement group which has no debts. What should you be concerned about?
  • At the end of the day, what is the objective of the financial analyst?
  • Is personnel cost a variable or a fixed cost?
  • Why is the increase in inventories of raw materials deducted from purchases in the by nature income statement format?
  • The financial director of a company makes the following comments: “The company performed remarkably well this year. You be the judge – our depreciation policy enabled us to generate 50% more EBITDA than last year. Our working capital has increased sharply, due to a more generous customer credit policy (three months instead of two) and to a significant increase in our inventories.” What is your response? What advice would you give?
  • Why should we discount?
  • Can net present value be negative? What does this mean?
  • Provide several examples illustrating the difference between cash receipts and revenues, cash expenses and costs.
  • What is net present value equal to?
  • What is a non-cash expense? What is a deferred charge? Describe their similarities and the differences between them.
  • If you believe that interest rates are going to rise, would you be better off choosing loans that are repayable on maturity or in fixed annual installments?
  • Do shareholders and lenders carry out financial analysis in the same way?
  • What is the simple link between the discount factor and the capitalisation factor?
  • In what kind of sector is capex very low?
  • Does the inflation-related increase in the nominal value of an asset appear on the income statement?
  • Should the cash outflows of launching a new perfume be considered as an operating outlay or an investment outlay?
  • What assumptions are made in a comparative financial analysis, especially on an international scale?
  • Are initial flows on an investment more often positive or negative? What about for final cash flows?
  • Why do we say that financial flows are the flip side of investment and operating flows?
  • An aeronautics group has substantial inventories of unfinished goods. What consequences will this have? What measures would you suggest to improve this situation?
  • A market is in equilibrium when present values are nil and net present values are positive. True or false?
  • In concrete terms, based on the diagram on page 35, by how much does a company create wealth over a given financial period? Why?
  • A company raises €500m in shareholders’ equity for an R&D project. Has it become richer or poorer? By how much? What is your answer if the company spends half of the funds in the first two years, and the project does not produce results? In the third year, the company uses the remaining funds to acquire a competitor that is overvalued by 25%. But thanks to synergies with this new subsidiary, it is able to improve its earnings by €75m. Has it become richer or poorer? By how much?

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