某公司理财名词解释习题(英文版)

CONCEPTQUESTIONS-CHAPTER1Whatarethethreebasicquestionsofcorporatefinance?a.Investmentdecision(capitalbudgeting):Whatlong-terminvestmentstrategyshouldafirmadopt?b.Financingdecision(capitalstructure):Howmuchcashmustberaisedfortherequiredinvestments?Short-termfinancedecision(workingcapital):Howmuchshort-termcashflowdoescompanyneedtopayitsbills.Describecapitalstructure.Capitalstructureisthemixofdifferentsecuritiesusedtofinanceafirm'sinvestments.Listthreereasonswhyvaluecreationisdifficult.Valuecreationisdifficultbecauseitisnoteasytoobservecashflowsdirectly.Thereasonsare:a.Cashflowsaresometimesdifficulttoidentify.b.Thetimingofcashflowsisdifficulttodetermine.c.Cashflowsareuncertainandthereforerisky.1.2Whatisacontingentclaim?Acontingentclaimisaclaimwhosepayoffsaredependentonthevalueofthefirmattheendoftheyear.Inmoregeneralterms,contingentclaimsdependonthevalueofanunderlyingasset.Describeequityanddebtascontingentclaims.Bothdebtandequitydependonthevalueofthefirm.Ifthevalueofthefirmisgreaterthantheamountowedtodebtholders,theywillgetwhatthefirmowesthem,whilestockholderswillgetthedifference.Butifthevalueofthefirmislessthanequity,bondholderswillgetthevalueofthefirmandequityholdersnothing.1.3Defineaproprietorship,apartnershipandacorporation.Aproprietorshipisabusinessownedbyasingleindividualwithunlimitedliability.Apartnershipisabusinessownedbytwoormoreindividualswithunlimitedliability.Acorporationisabusinesswhichisa"legalperson"withmanylimitedliabilityowners.Whataretheadvantagesofthecorporateformofbusinessorganization?Limitedliability,eastofownershiptransferandperpetualsuccession.1.4Whatarethetwotypesofagencycosts?Monitoringcostsoftheshareholdersandtheincentivefeespaidtothemanagers.Howaremanagersbondedtoshareholders?Shareholdersdeterminethemembershiptotheboardofdirectors,whichselectsmanagement.Managementcontractsandincentivesarebuildintocompensationarrangements.Ifafirmistakenoverbecausethefirm'spricedropped,managerscouldlosetheirjobs.Competitioninthemanageriallabormarketmakesmanagersperforminthebestinterestofstockholders.Canyourecallsomemanagerialgoals?Maximizationofcorporatewealth,growthandcompanysize.Whatistheset-of-contractsperspective?Theviewofthecorporationasasetofcontractingrelationshipsamongindividualswhohaveconflictingobjectives.1.5Distinguishbetweenmoneymarketsandcapitalmarkets.Moneymarketsaremarketsfordebtsecuritiesthatpayoffinlessthanoneyear,whilecapitalmarketsaremarketsforlong-termdebtandequityshares.Whatislisting?ListingreferstotheproceduresbywhichacompanyappliesandqualifiessothatitsstockcanbetradedontheNewYorkStockExchange.Whatisthedifferencebetweenaprimarymarketandasecondarymarket?Theprimarymarketisthemarketwhereissuersofsecuritiessellthemforthefirsttimetoinvestors,whileasecondarymarketisamarketforsecuritiespreviouslyissued.CONCEPTQUESTIONS-CHAPTER22.1Whatisthebalance-sheetequation?Assets=Liabilities+Stockholders'equityWhatthreethingsshouldbekeptinmindwhenlookingatabalancesheet?Accountingliquidity,debtvs.equity,andvaluevs.cost.2.2Whatistheincomestatementequation?Revenue-expenses=IncomeWhatarethethreethingstokeepinmindwhenlookingatanincomestatement?GenerallyAcceptedAccountingPrinciples(GAAP),noncashitems,andtimeandcosts.Whatarenoncashexpenses?Noncashexpensesareitemsincludedasexpensesbutwhichdonotdirectlyaffectcashflow.Themostimportantoneisdepreciation.2.3Whatisnetworkingcapital?Itisthedifferencebetweencurrentassetsandcurrentliabilities.Whatisthechangeinnetworkingcapital?Todeterminechangesinnetworkingcapitalyousubtractusesofnetworkingcapitalfromsourcesofnetworkingcapital.2.4Howiscashflowdifferentfromchangesinnetworkingcapital?Thedifferencebetweencashflowandchangesinnewworkingcapitalisthatsometransactionsaffectcashflowandnotnetworkingcapital.Theacquisitionofinventorieswithcashisagoodexampleofachangeinworkingcapitalrequirements.Whatisthedifferencebetweenoperatingcashflowandtotalcashflowofthefirm?Themaindifferencebetweenthetwoiscapitalspendingandadditionstoworkingcapital,thatis,investmentinfixedassetsand"investment"inworkingcapital.CONCEPTQUESTIONS-CHAPTER33.1Whatisaninterestrate?Itisthepaymentrequiredbythelenderofmoneyfortheuseofitduringadeterminedperiodoftime.Itisexpressedinpercentage.Whatareinstitutionsthatmatchborrowersandlenderscalled?Theyarecalledfinancialinstitutions.Whatdowemeanwhenwesayamarketclears?Whatisanequilibriumrateofinterest?Amarketclearsiftheamountofmoneyborrowerswanttoborrowisequaltotheamountlenderswishtolend.Anequilibriumrateofinterestistheinterestrateatwhichmarketsclear.3.2Howdoesanindividualchangehisconsumptionacrossperiodsthroughborrowingandlending.Byborrowingandlendingdifferentamountsthepersoncanachieveanyofallconsumptionpossibilitiesavailable.Howdointerestratechangesaffectone'sdegreeofimpatience?Aperson'slevelofpatiencedependsupontheinterestrateheorshefacesinthemarket.Apersoneagertoborrowmoneyatalowinterestratewillbecomelesseagerifthatinterestrateisraisedandmayprefertolendmoneytotakeadvantageofhigherinterestrates.3.3Whatisthemostimportantfeatureofacompetitivefinancialmarket?Noinvestor,individualorcorporationcanhaveasignificanteffectontotallendingoroninterestrates.Therefore,investorsarepricetakers.Whatconditionsarelikelytoleadtothis?Tradingiscostless.InformationaboutborrowingandlendingopportunitiesisavailableTherearemanytraders.3.4Describethebasicfinancialprincipleofinvestmentdecision-making?Aninvestmentprojectisworthundertakingonlyifitismoresdesirablethanwhatisavailableinthefinancialmarkets.3.5Describehowthefinancialmarketscanbeusedtoevaluateinvestmentalternatives?Thefinancialmarketscanbeusedasabenchmark.Iftheproposedinvestmentprovidesabetteralternativethanthefinancialmarkets,itshouldbeundertaken.Whatistheseparationtheorem?Whyisitimportant?Theseparationtheoremsaysthatthedecisionastowhethertoundertakeaproject(comparedtothefinancialmarkets)isindependentoftheconsumptionpreferencesoftheindividual.Itisimportantbecausewecanmakeinvestmentdecisionsbasedonobjectivedata,disregardingpersonalpreferences.3.6Givethedefinitionsofnetpresentvalue,futurevalueandpresentvalue?Newpresentvalueisthedifferenceinpresentvaluetermsbetweencashinflowsandcashoutflows.Giventhefinancialmarket,thefuturevalueisanamountequivalenttotheamountcurrentlyheld,andpresentvalueistheamountequivalentnowtoanamounttobereceivedorgiveninthefuture.Whatinformationdoesapersonneedtocomputeaninvestment'snetpresentvalue?Cashinflows,cashoutflowsandaninterestordiscountrate.3.7Intermsofthenet-present-valuerule,whatistheessentialdifferencebetweentheindividualandthecorporation.Themaindifferenceisthatfirmshavenoconsumptionendowment.CONCEPTQUESTIONS-CHAPTER44.1Definefuturevalueandpresentvalue.Futurevalueisthevalueofasumafterinvestingoveroneormoreperiods.Presentvalueisthevaluetodayofcashflowstobereceivedinthefuture.Howdoesoneusenetpresentvaluewhenmakinganinvestmentdecision?Onedeterminesthepresentvalueoffuturecashflowsandthensubtractsthecostoftheinvestment.Ifthisvalueispositive,theinvestmentshouldbeundertaken.IftheNPVisnegative,thentheinvestmentshouldberejected.4.2Whatisthedifferencebetweensimpleinterestandcompoundinterest?Withsimpleinterest,theinterestontheoriginalinvestmentisnotreinvested.Withcompoundinterest,eachinterestpaymentisreinvestedandoneearnsinterestoninterest.Whatistheformulaforthenetpresentvalueofaproject?TNPV=-C0+Ct/(1+I)tt=14.3Whatisastatedannualinterestrate?Thestatedannualinterestrateistheannualinterestratewithoutconsiderationofcompounding.Whatisaneffectiveannualinterestrate?Aneffectiveannualinterestrateisaratethattakescompoundingintoaccount.Whatistherelationshipbetweenthestatedannualinterestrateandtheeffectiveannualinterestrate?Effectiveannualinterestrate=(1+(r/m))m-1.Definecontinuouscompounding.Continuouscompoundingcompoundsinvestmentseveryinstant.4.4Whataretheformulasforperpetuity,growing-perpetuity,annuity,andgrowingannuity?Perpetuity:PV=C/rGrowingPerpetuity:PV=C/(r-g)Annuity:PV=(C/r)[1-1/(1+r)T]GrowingAnnuity:PV=[C/(r-g)][1-((1+g)/(1+r))T]Whatarethreeimportantpointsconcerningthegrowingperpetuityformula?Thenumerator.Theinterestrateandthegrowthrate.Thetimingassumption.Whatarefourtricksconcerningannuities?Adelayedannuity.AnannuityinadvanceAninfrequentannuityTheequatingofpresentvaluesoftwoannuities.CONCEPTQUESTIONS-CHAPTER55.2Definepurediscountbonds,level-couponbonds,andconsols.Apurediscountbondisonethatmakesnointerveninginterestpayments.Onereceivesasinglelumpsumpaymentatmaturity.Alevel-couponbondisacombinationofanannuityandalumpsumatmaturity.Aconsolisabondthatmakesinterestpaymentsforever.Contrastthestateinterestrateandtheeffectiveannualinterestrateforbondspayingsemi-annualinterest.Effectiveannualinterestrateonabondtakesintoaccounttwoperiodsofcompoundingperyearreceivedonthecouponpayments.Thestateratedoesnottakethisintoaccount.5.3Whatistherelationshipbetweeninterestratesandbondprices?Thereisaninverserelationship.Whenonegoesup,theothergoesdown.Howdoesonecalculatetheyieldtomaturityonabond?Onefindsthediscountratethatequatesthepromisedfuturecashflowswiththepriceofthebond.5.8Whatarethethreefactorsdeterminingafirm'sP/Eratio?Today'sexpectationsoffuturegrowthopportunities.Thediscountrte.Theaccountingmethod.5.9WhatistheclosingpriceofGeneralData?TheclosingpriceofGeneralDatais63/16.WhatisthePEofGeneralHouse?ThePEofGeneralHouseis29.WhatistheannualdividendofGeneralHost?TheannualdividendofGeneralHostiszero.CONCEPTQUESTIONS-AppendixtoChapter5Whatisthedifferencebetweenaspotinterestrateandtheyieldtomaturity?Theyieldtomaturityisthegeometricaverageofthespotratesduringthelifeofthebond.Definetheforwardrate.Givenaone-yearbondandatwo-yearbond,oneknowsthespotratesforboth.Theforwardrateistherateofreturnimplicitonaone-yearbondpurchasedinthesecondyearthatwouldequatetheterminalwealthofpurchasingtheone-yearbondtodayandanotherinoneyearwiththatofthetwo-yearbond.Whatistherelationshipbetweentheone-yearspotrate,thetwo-yearspotrateandtheforwardrateoverthesecondyear?Theforwardratef2=[(1+r2)2/(1+r1)]-1Whatistheexpectationhypothesis?Investorssetinterestratessuchthattheforwardrateoveragivenperiodequalsthespotrateforthatperiod.Whatistheliquidity-preferencehypothesis?Thishypothesismaintainsthatinvestorsrequireariskpremiumforholdinglonger-termbonds(i.e.theyprefertobeliquidorshort-terminvestors).Thisimpliesthatthemarketsetstheforwardrateforagivenperiodabovetheexpectedspotrateforthatperiod.CONCEPTQUESTIONS-CHAPTER66.2Listtheproblemsofthepaybackperiodrule.Itdoesnottakeintoaccountthetimevalueofmoney.Itignorespaymentsafterthepaybackperiod.Thecutoffperiodisarbitrary.Whataresomeadvantages?Itissimpletoimplement.Itmayhelpincontrollingandevaluatingmanagers.6.4WhatarethethreestepsincalculatingAAR?Determineaveragenetincome.DetermineaverageinvestmentDivideaveragenetincomebyaverageinvestment.WhataresomeflawswiththeAARapproach?Itusesaccountingfigures.Ittakesnoaccountoftiming.Thecutoffperiodisarbitrary.6.5HowdoesonecalculatetheIRRofaproject?Usingeithertrial-and-errororafinancialcalculator,onefindsthediscountratethatproducesanNPVofzero.6.6Whatisthedifferencebetweenindependentprojectsandmutuallyexclusiveprojects?Anindependentprojectisonewhoseacceptancedoesnotaffecttheacceptanceofanother.Amutuallyexclusiveproject,ontheotherhandisonewhoseacceptanceprecludestheacceptanceofanother.WhataretwoproblemswiththeIRRapproachthatapplytobothindependentandmutuallyexclusiveprojects?Thedecisionruledependsonwhetheroneisinvestingoffinancing.Multipleratesofreturnarepossible.Whataretwoadditionalproblemsapplyingonlytomutuallyexclusiveprojects?TheIRRapproachignoresissuesofscale.TheIRRapproachdoesnotaccommodatethetimingofthecashflowsproperly.6.7Howdoesonecalculateaproject'sprofitabilityindex?Dividethepresentvalueofthecashflowssubsequenttotheinitialinvestmentbytheinitialinvestment.Howistheprofitabilityindexappliedtoindependentprojects,mutuallyexclusiveprojects,andsituationsofcapitalrationing?Withindependentprojects,accepttheprojectifthePIisgreaterthan1.0andrejectiflessthan1.0.Withmutuallyexclusiveprojects,useincrementalanalysis,subtractingthecashflowsofproject2fromproject1.FindthePI.IfthePIisgreaterthan1.0,acceptproject1.Iflessthan1.0,acceptproject2.Incapitalrationing,thefirmshouldsimplyranktheprojectsaccordingtotheirrespectivePIsandaccepttheprojectswiththehighestPIs,subjecttothebudgetconstrain.CONCEPTQUESTIONS-CHAPTER77.1Whatarethethreedifficultiesindeterminingincrementalcashflows?Sunkcosts.OpportunitycostsSideeffects.Definesunkcosts,opportunitycosts,andsideeffects.Sunkcostsarecoststhathavealreadybeenincurredandthatwillnotbeaffectedbythedecisionwhethertoundertaketheinvestment.Opportunitycostsarecostsincurredbythefirmbecause,ifitdecidestoundertakeaproject,itwillforegootheropportunitiesforusingtheassets.Sideeffectsappearwhenaprojectnegativelyaffectscashflowsfromotherpartsofthefirm.7.2Whataretheitemsleadingtocashflowinanyyear?Cashflowfromoperations(revenue-operatingcosts-taxes)pluscashflowofinvestment(costofnewmachines+changesinnetworkingcapital+opportunitycosts).WhydidwedetermineincomewhenNPVAnalysisdiscountscashflows,notincome?Becauseweneedtodeterminehowmuchispaidoutintaxes.Whyisworkingcapitalviewedasacashoutflow?Becauseincreasesinworkingcapitalmustbefundedbycashgeneratedelsewhereinthefirm.7.3Whatisthedifferencebetweenthenominalandtherealinterestrate?Thenominalinterestrateistherealinterestratewithapremiumforinflation.Whatisthedifferencebetweennominalandrealcashflows?Realcashflowsarenominalcashflowsadjustedforinflation.7.4Whatistheequivalentannualcostmethodofcapitalbudgeting?Thedecisionastowhichofvariousmutuallyexclusivemachinestobuyisbasedontheequivalentannualcost.TheEACisdeterminedbydividingthenetpresentvalueofcostsbyanannuityfactorthathasthesamelifeasthemachines.ThemachinewiththelowestEACshouldbeacquired.CanyoulisttheassumptionsthatwemusttouseEAC?Allmachinesdothesamejob.TheyhavedifferentoperatingcostsandlivesThemachinewillbeindefinitelyreplaced.CONCEPTQUESTIONS-CHAPTER88.1WhatarethewaysafirmcancreatepositiveNPV.Befirsttointroduceanewproduct.Furtherdevelopacorecompetencytoproductgoodsorservicesatlowercoststhancompetitors.Createabarrierthatmakesitdifficultfortheotherfirmstocompeteeffectively.IntroducevariationonexistingproductstotakeadvantageofunsatisfieddemandCreateproductdifferentiationbyaggressiveadvertisingandmarketingnetworks.Useinnovationinorganizationalprocessestodoalloftheabove.HowcanmanagersusethemarkettohelpthemscreenoutnegativeNPVprojects?8.2Whatisadecisiontree?Itisamethodtohelpcapitalbudgetingdecision-makersevaluatingprojectsinvolvingsequentialdecisions.Ateverypointinthetree,therearedifferentalternativesthatshouldbeanalyzed.Whatarepotentialproblemsinusingadecisiontree?Potentialproblems1)thatadifferentdiscountrateshouldbeusedfordifferentbranchesinthetreeand2)itisdifficultfordecisiontreestocapturemanagerialoptions.8.3Whatisasensitivityanalysis?Itisatechniqueusedtodeterminehowtheresultofadecisionchangeswhensomeoftheparametersorassumptionschange.Whyisitimportanttoperformasensitivityanalysis?Becauseitprovidesananalysisoftheconsequencesofpossiblepredictionorassumptionerrors.Whatisabreak-evenanalysis?Itisatechniqueusedtodeterminethevolumeofproductionnecessarytobreakeven,thatis,tocovernotonlyvariablecostsbutfixedcostsaswell.Describehowsensitivityanalysisinteractswithbreak-evenanalysis.Sensitivityanalysiscandeterminehowthefinancialbreak-evenpointchangeswhensomefactors(suchasfixedcosts,variablecosts,orrevenue)change.CONCEPTQUESTIONS-CHAPTER99.1Whatarethetwopartsoftotalreturn?Dividendincomeandcapitalgain(orloss)Whyareunrealizedcapitalgainsorlossesincludedinthecalculationofreturns?Becauseitisasmuchapartofreturnsasdividends,eveniftheinvestordecidestoholdontothestockandnottorealizethecapitalgain.Whatisthedifferencebetweenadollarreturnandapercentagereturn?Adollarreturnistheamountofmoneytheoriginalinvestmentprovided,whilepercentagereturnisthepercentageoftheoriginalinvestmentrepresentedbythetotalreturn.9.2Whatisthelargestone-periodreturninthe63-yearhistoryofcommonstockswehavedisplayed,andwhendiditoccur?Whatisthesmallestreturn,andwhendiditoccur?Largestcommonstockreturn:53.99%in1933.Smallestcommonstockreturn:-43.34%in1931.Inhowmanyyearsdidthecommonstockreturnexceed30percent,andinhowmanyyearswasitbelow20percent?Itexceeded30%in16years.Itwasbelow20%in39years.Forcommonstocks,whatisthelongestperiodoftimewithoutasinglelosingyear?Whatisthelongeststreakoflosingyears?Thereare6consecutiveyearsofpositivereturns.Thelongestlosingstreakwas4years.Whatisthelongestperiodoftimesuchthatifyouhaveinvestedatthebeginningoftheperiod,youwouldstillnothavehadapositivereturnonyourcommon-stockinvestmentbytheend?Thelongestperiodoftimewas14years(from1929to1942).9.4Whatisthemajorobservationaboutcapitalmarketsthatwewillseektoexplain?Thatthereturnonriskyassetshasbeenhigheronaveragethanthereturnonrisk-freeassets.Whatdoestheobservationtellusaboutinvestorsfortheperiodfrom1926through1994.AninvestorinthisperiodwasrewardedforinvestmentinthestockmarketwithanextraorexcessreturnoverwhatwouldhaveachievedbysimplyinvestinginT-bills.9.5Whatisthedefinitionofsampleestimatesofvarianceandstandarddeviation?VarianceisgivenbyVar(R)=(1/(T-1))t(Rt-R)2whereTisthenumberofperiods,RtistheperiodreturnandRisthesamplemean.StandarddeviationisgivenbySD=Var1/2.ForlargeT,(T-1)maybeapproximatedbyT.Howdoesthenormaldistributionhelpusinterpretstandarddeviation?Foranormaldistribution,theprobabilityofhavingareturnthatisaboveorbelowthemenbyacertainamountonlydependsonthestandarddeviation.9.6Howcanfinancialmanagersusethehistoryofcapitalmarketstoestimatetherequiredrateofreturnonnonfinancialinvestmentswiththesameriskastheaveragecommonstock?Theycandeterminethehistoricalriskpremiumandaddthisamounttothecurrentrisk-freeratetodeterminetherequiredreturnoninvestmentsofthatrisk.CONCEPTQUESTIONS-CHAPTER1010.3Whataretheformulasfortheexpectedreturn,variance,andstandarddeviationofaportfoliooftwoassets?E{Rp}=XiRi+XjRjVarp=(Xi2(Ri-Ri)2+Xj2(Rj-Rj)2+2XiXj(Ri-Ri)(Rj-Rj)SDp=Varp1/2Whatisthediversificationeffect?Aslongasthecorrelationcoefficientbetweentwosecuritiesislessthanone,thestandarddeviationofaportfoliooftwosecuritiesislessthantheweightedaverageofthestandarddeviationsoftheindividualsecurities.Whatarethehighestandlowestpossiblevaluesforthecorrelationcoefficient?+1and-1.10.4Whatistherelationshipbetweentheshapeoftheefficientsetfortwoassetsandthecorrelationbetweenthetwoassets?Thelesscorrelationthereisbetweentwoassetsthemoretheefficientsetbendsintowardthey-axis.10.5Whatistheformulaforthevarianceofaportfolioformanyassets?NNVarp=[XiXj(Ri–Ri)(Rj–Rj)]I=1j=1Howcantheformulabeexpressedintermsofaboxormatrix?Thetermsonthediagonalofthematrixrepresentthevariancesofeachtermandtheoff-diagonalelementsrepresentthecovariances.10.6Whatarethetwocomponentsofthetotalriskofasecurity?Portfolioriskanddiversifiablerisk.Whydoesn'tdiversificationeliminateallrisk?Becausethevariancesoftheportfolioasymptoticallyapproachestheportfoliorisk.Thisriskisthecovarianceofeachpairofsecurities,whichalwaysremains.10.7Whatistheformulaforthestandarddeviationofaportfoliocomposedofonerisklessandoneriskyasset?SDP=(XA2VarA)1/2=XASDAwhereAistheriskyassetHowdoesonedeterminetheoptimalportfolioamongtheefficientsetofriskyassets?Thisportfolioliesatthepointatwhichalinedrawnfromtherisk-freerateistangenttotheefficientset.10.8Ifallinvestorshavehomogeneousexpectations,whatportfolioofriskyassetsdotheyhold?Themarketportfolio.Whatistheformulaforbeta?Bi=COV(RiRm)/Var(Rm)Whyisthebetatheappropriatemeasureofriskforasinglesecurityinalargeportfolio?Becausebetameasuresthecontributionofthatsinglesecuritytothevarianceoftheportfolio.10.9WhyistheSMLastraightline?Becauseinvestorscouldformhomemadeportfoliosthatdominateportfoliosthatdon'tlieonastraightline.Buyingandsellingoftheseportfolioswouldthendriveanyoutliersbacktotheline.WhatistheCapital-Asset-Pricingmodel?TheCAPMisalinearmodelthatrelatestheexpectedreturnonanassettoitssystematicrisk(beta).Whatarethedifferencesbetweenthecapitalmarketlineandthesecuritymarketline?TheSMLrelatesexpectedreturntobeta,whiletheCMLrelatesexpectedreturntothestandarddeviation.TheSMLholdsbothforallindividualsecuritiesandforallpossibleportfolios,whereastheCMLholdsonlyforefficientportfolios.CONCEPTQUESTIONS-CHAPTER1111.1Whatarethetwobasicpartsofareturn?TheexpectedpartThesurp