FIN 571 Complete Week 3 NEW

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FIN 571 Complete Week 3 NEW

FIN 571 Week 3 DQ 1 NEW

The Long-Term funding strategy relies on long-term 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 trade-off 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 short-term financing such as:
Accounts payable (trade credit), bank loans, and commercial paper are common sources of short-term 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 financial sense to pay early and take advantage of the
discount or to wait and pay in full when the account is due.

Short-term 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 agreed-upon 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 short-term 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 350-700 word summary of your discussion.

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 $

Inventory $12,890

Accounts receivable 12,800

Accounts payable 12,670

Net sales $124,589

Cost of goods sold 99,630

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 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.

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%