Be Strong: 2010

Wednesday, December 1, 2010

ECO-401 Chapter 1 MCQs part 3 MANAGEMENT SKILLS

MANAGEMENT SKILLS

74. The three essential managerial skills put forth by Katz include _____________.
a. technical, human, and empirical
b. human, empirical, and conceptual
c. technical, interpersonal, and controlling
d. technical, human, and conceptual
(d; moderate; p. 12)

ECO-401 Chapter 1 MCQs part 2 WHAT IS MANAGEMENT

WHAT IS MANAGEMENT?

43. _____________ is the process of getting activities completed efficiently and effectively with and through other people.
a. Leading
b. Management
c. Supervision
d. Controlling
(b; easy; p. 7)

44. The distinction between a managerial position and a nonmanagerial position is _______________.
a. planning the work of others
b. coordinating the work of others
c. controlling the work of others
d. organizing the work of others
(b; moderate; p. 7)

Chapter 1 Introduction to Management and Organizations

Chapter 1 Introduction to Management and Organizations

TRUE/FALSE QUESTIONS

A MANAGER’S DILEMMA
1. According to the discussion in a “A Manager’s Dilemma,” Tom Gegax believes that believes that helping
employees balance personal and work lives will lead to increased performance.
(True; moderate; p. 3)

14 Principles of Management - Henri Fayol

MGT-503

14 Principles of Management - Henri Fayol

Fayol was the first to identify the four functions of management: planning, organizing, directing, and controlling, as known today.
His original definition of management comprised of five elements: forecast & plan, organise, command, coordinate, and control.
His 14 principles are:

1-Division of work -
specialisation provides the individual to build up experience, continuous improvement in skills, and thereby be more productive.

Top 10 New Manager Mistakes

Top 10 New Manager Mistakes

By F. John Reh, About.com Guide

Managing can be a little difficult at first. A recent poll found that more than 50% of managers received NO training before starting the job. Here is a list of the most common mistakes new managers make so you can avoid making them too. (If you think I missed one, use the "Readers Respond" link at the bottom to add a new one.)

1. Think you know everything.

If you were just promoted to Production Manager, you may feel you know everything about production. Even if that were true, and it isn't, you sure don't know everything about the most important part of your new job, managing people. Listen to the people around you. Ask for their input when appropriate. Keep an open mind.

Manager Mistakes MGT-503

MGT-503
Manager's Mistakes

1. Putting policies ahead of people.

The smaller the organization, the larger the mistake this is. Policies are made to be followed, within reason. Some flexibility with employees, particularly in a small company, is important. An even bigger mistake is standing behind policies at the expense of losing loyal customers. Weigh the significance of standing behind your policy in each situation. If it is a matter of physical safety or security, policies must be upheld. However, in many other instances, there are reasonable solutions that will not alienate the customer or create a strained relationship with your employee(s).

Online 45 MCQz of MGT -402

Online 45 MCQz of MGT -402
Question # 1
Which of the following is considered as basic systems of remunerating labor?
i) Time rate system
ii) Piece rate system
iii) Halsey Premium plan
iv) Both time rate and piece rate system

Question # 2
A method by which the first goods to be received are said to be the first to by sold

i)LIFO
ii)AVCO
iii)FIFO
iv)WASH

What is Accounting

[What is Accounting]

What is the relationship between cost accounting financial accounting and managerial accounting?

Financial accounting relates to the information presented based on past events and records.

Cost and managerial accounting is the presentation of financial information to the management to be used in decision making while in managerial accounting projections are made based on past trends.

Financial accounting relates to the information presented based on past events and records.

Cost and managerial accounting is the presentation of financial information to the management to be used in decision making while in managerial accounting projections are made based on past trends.

MGT201(Financial Management) All formulas

PV IF = 1 - (1+i)^-n = (1-(1+i)^-n)/i (to use in Excel worksheet)

FV IF = (1+i)^n - 1 = (1+i)^(n) -1 )/i
i

FV = PV*(1+i)^n

PV = FV/(1+i)^n

i = (Future Payment/Present Value)^^1/n - 1

1. Fundamental Accounting Equation and Double Entry Principle.

• Assets +Expense = Liabilities + Shareholders’ Equity + Revenue

Liabilities = Equity = Net Worth

Revenue – Expense = Income

Statement of Retained Earnings or Shareholders’ Equity Statement

Total Equity = Common Par Stock Issued + Paid In Capital + Retained Earnings

Current Ratio:

= Current Assets / Current Liabilities

Quick/Acid Test ratio:

= (Current Assets – Inventory) / Current Liabilities

Average Collection Period:

= Average Accounts Receivable /(Annual Sales/360)

PROFITABILITY RATIOS:

Profit Margin (on sales):

= [Net Income / Sales] X 100

Return on Assets:

= [Net Income / Total Assets] X 100

Return on equity:

= [Net Income/Common Equity]

6. ASSET MANAGEMENT RATIOS

Inventory Turnover:

= Sales / inventories

Total Assets Turnover:

= Sales / Total Assets

DEBT (OR CAPITAL STRUCTURE) RATIOS:

Debt-Assets:

= Total Debt / Total Assets

Debt-Equity:

= Total Debt / Total Equity

Times-Interest-Earned:

= EBIT / Interest Charges

Market Value Ratios:

Price Earning Ratio:

= Market Price per share / *Earnings per share

Market /Book Ratio:

= Market Price per share / Book Value per share

*Earning Per Share (EPS):

= Net Income / Average Number of Common Shares Outstanding

M.V.A (Market Value Added):

MVA (Rupees) = Market Value of Equity – Book Value of Equity Capital

E.V.A (Economic Value Added):

EVA (Rupees) = EBIT (or Operating Profit) – Cost of Total Capital

Interest Theory:

• Economic Theory:

i = iRF + g + DR + MR + LP + SR

– i is the nominal interest rate generally quoted in papers. The “real” interest rate = i – g

Here i = market interest rate

g = rate of inflation

DR = Default risk premium

MR = Maturity risk premium

LP = Liquidity preference

SR = Sovereign Risk

The explanation of these determinants of interest rates is given as under:

Market Segmentation:

Simple Interest (or Straight Line):

F V = PV + (PV x i x n)

Discrete Compound Interest:

Annual (yearly) compounding:

F V = PV x (1 + i) n

Monthly compounding:

F V = PV x (1 + (i / m) m x n

Continuous (or Exponential) Compound Interest:
F V (Continuous compounding) = PV x e i x n

Estimated current assets for the next year

= [Current assets for the current year/Current sales] x Estimated sales for the next year

Expected Estimated retained earnings

= estimated sales x profit margin x plowback ratio

Estimated discretionary financing

= estimated total assets – estimated total liabilities –estimated total equity

G (Desired Growth Rate)

= return on equity x (1- pay out ratio)

CASH FLOW STATEMENT

Net Income

Add Depreciation Expense

Subtract Increase in Current Assets:

Increase in Cash

Increase in Inventory

Add Increase in Current Liabilities:

Increase in A/c Payable

Cash Flow from Operations

Cash Flow from Investments

Cash Flow from Financing

Net Cash Flow from All Activities

Interest Rates for Discounting Calculations

• Nominal (or APR) Interest Rate = i nom

• Periodic Interest Rate = i per

It is defined as

iper = ( i nominal Interest rate) / m

Where

m = no. of times compounding takes place in 1 year i.e.

If semi-annual compounding then m = 2

• Effective Interest Rate = i eff

i eff = [1 + ( i nom / m )]m – 1

Calculating the NPV of the Café Business for 1st Year:

NPV = Net Present Value (taking Investment outflows into account)

NPV = −Initial Investment + Sum of Net Cash Flows from Each Future Year.

NPV = − Io +PV (CF1) + PV (CF2) + PV (CF3) + PV (CF4) + ...+ ∞

Annual Compounding (at end of every year):

FV = CCF (1 + i) n – 1

Annual Compounding (at end of every year)

PV =FV / (1 + i ) n . n = life of Annuity in number of years

Multiple Compounding:

Future Value of annuity =CCF (constant cash flow)*(1+ (i/m) m*n-1/i/n

Multiple Compounding:

PV =FV / [1 + (i/m)] mxn

Future value of perpetuity:

=constant cash flow/interest rate

Future value by using annuity formula

FV =CCF [(1+i) n - 1]/ i

Return on Investments:

ROI= (ΣCF/n)/ IO

Net Present Value (NPV):

NPV= -IO+ΣCFt/ (1+i) t

Detail

NPV = -Io + CFt / (1+i)t = -Io + CF1/(1+i) + CF2/(1+i) ^2 + CF` /(1+i)^3 +..

-IO= Initial cash outflow

i=discount /interest rate

t=year in which the cash flow takes place

Probability Index:

PI = [Σ CFt / (1+ i) t ]/ IO

Internal Rate Of Return(IRR) Equation:

NPV= -IO +CF1/ (1+IRR) + CF2/ (1+IRR) ^2......

Internal Rate of Return or IRR:

The formula is similar to NPV

NPV = 0 = -Io + CFt / (1+IRR)t = -Io + CF1/(1+IRR) + CF2/(1+IRR) ^2 + ..

Modified IRR (MIRR):

(1+MIRR) n = Future Value of All Cash Inflows….

Present Value of All Cash Outflows

(1+MIRR) n = CF in * (1+k) n-t

CF out / (1+k) t

Equivalent Annual Annuity Approach:

EAA FACTOR = (1+ i)^ n / [(1+i)^ n -1]

Where n = life of project & i=discount rate

BONDS’ VALUATION

The relationship between present value and net present value

NPV = -Io + PV

Present Value formula for the bond:

PV= Σ CFt / (1+rD)t =CF1/(1+rD)+CFn/(1+rD)2 +..+CFn/ (1+rD) n +PAR/ (1+rD) ^n

t =1

In this formula

PV = Intrinsic Value of Bond or Fair Price (in rupees) paid to invest in the bond. It is the Expected or Theoretical Price and NOT the actual Market Price.

rD = it is very important term which you should understand it care fully. It is Bondholder’s (or

Investor’s) Required Rate of Return for investing in Bond (Debt).As conservative you can choose

minimum interest rate. It is derived from Macroeconomic or Market Interest Rate. Different from the Coupon Rate!

Recall Macroeconomic or Market Interest Theory: i = iRF + g + DR + MR + LP + SR

CF = cash flow = Coupon Receipt Value (in Rupees) = Coupon Interest Rate x Par Value. Represents cash receipts (or in-flow) for Bondholder (Investor). Often times an ANNUITY pattern Coupon Rate derived from Macroeconomic or Market Interest Rate. The Future Cash Flows from a bond are simply the regular Coupon Receipt cash in-flows over the life of the Bond. But, at Maturity Date there are 2 Cash In-flows: (1) the Coupon Receipt and (2) the Recovered Par or Face Value (or Principal)

n = Maturity or Life of Bond (in years)

In the next lectures, you would study that how the required rate of return is related to market rate of return

Calculate the PV of Coupons from the FV Formula for Annuities (with multiple compounding within 1 year):

FV = CCF (1 + rD/m )nxm - 1/rD/m

Use Monthly Basis for this example. n = 1 year m = 12 months

CCF = Constant Cash Flow = Rs 1,000 = Monthly Coupon

rD = Annual Nominal Required Rate of Return for investment in Bond (Debt) = 10% pa.

Periodic Monthly Required Rate of Return is rD/m = 10/12 = 0.833 % = 0.00833 p.m.

m = 12 months

YTM =Total or Overall Yield:

= Interest Yield + Capital Gains Yield

Interest Yield or Current Yield:

= Coupon / Market Price

Capital Gains Yield:

= YTM - Interest Yield

FV=CCF[(1+rD/m)n*m-1]/rD/m

N=1 year ,m= no. of intervals in a year =12

CCF=constant cash flow

n = Maturity or Life of Bond (in years)

Call:

=par value +I, year copoun receipts

Another thing to keep in mind is that YTM has two components first is

YTM:

=interest yield on bond +capital gain yield on bond

1. INTEREST YIELD =annual copoun interest /market price

2. CAPITAL YIELD =YTM –INTEREST YIELD

Perpetual Investment in Preferred Stock

– PV = DIV 1 / r PE

Perpetual Investment in Common Stock:

PV = DIV1/(1+rCE) +DIV2/(1+rCE)2 +…..+ DIVn/(1+rCE)n + Pn/(1+rCE)n

PV = Po* = Expected or Fair Price = Present Value of Share, DIV1= Forecasted Future Dividend at end of Year 1, DIV 2 = Expected Future Dividend at end of Year 2, …, Pn = Expected Future Selling Price, rCE = Minimum Required Rate of Return for Investment in the Common Stock for you (the investor). Note that Dividends are uncertain and n = infinity

PV (Share Price) = Dividend Value + Capital Gain.

Dividend Value is derived from Dividend Cash Stream and Capital Gain / Loss from Difference

between Buying & Selling Price.

Simplified Formula (Pn term removed from the equation for large investment durations i.e. n =

infinity):

PV = DIV1/ (1+rE) + DIV2/ (1+rE) 2 + … DIVn/(1+rE)n

= DIVt / (1+ rE) t. t = year. Sum from t =1 to n

Fair Value. Dynamic Equilibrium.

If Market Price > Fair Value then Stock is Over Valued

Share Price Valuation -Perpetual Investment in Common Stock:

Zero Growth Dividends Model:

DIV1 = DIV 2 = DIV3

The Formula for common stock

PV = Po*= DIV1 / (1+ rCE) + DIV1 / (1+ rCE) 2 + DIV1 / (1+ rCE) 3 + ... +...

= DIV 1 / rCE

Dividends Cash Flow Stream grows according to the Discrete Compound Growth Formula

DIVt+1 = DIVt x (1 + g) t.

t = time in years.

Zero Growth Model Pricing

PV = Po* = DIV1 / rCE

Constant Growth Model Pricing

PV = Po* = DIV1 / (rCE -g)

Dividends Pricing Models:

Zero Growth: Po*=DIV1 / rCE (Po* is being estimated)

rCE*= DIV1 / Po (rCE* is being estimated)

Similarly,

Constant Growth: Po*= DI V1/ (rCE -g)

rCE*= ( DIV 1 / Po) + g

use this formula to calculate the required rate of return.

Gordon’s Formula:

rCE*= (DIV 1 / Po) + g

In this the first part

(DIV 1 / Po) is the dividend yield

g is the Capital gain yield.

Earning per Share (EPS) Approach:

PV = Po* = EPS 1 / rCE + PVGO

Po = Estimated Present Fair Price,

EPS 1 = Forecasted Earnings per Share in the next year (i.e. Year 1),

rCE = Required Rate of Return on Investment in Common Stock Equity.

PVGO = Present Value of Growth Opportunities. It means the Present Value of Potential

Growth in Business from Reinvestments in New Positive NPV Projects and Investments PVGO is perpetuity formula.

The formula is

PVGO = NPV 1 / (rCE - g) = [-Io + (C/rCE)] / (rCE -g)

In this PVGO Model: Constant Growth “g”. It is the growth in NPV of new Reinvestment Projects (or Investment).g= plowback x ROE

Perpetual Net Cash Flows (C) from each Project (or reinvestment).

Io = Value of Reinvestment (Not paid to share holders)

= Pb x EPS

Where Pb= Plough back = 1 – Payout ratio

Payout ration = (DIV/EPS) and

EPS Earnings per Share= (NI - DIV) / # Shares of Common Stock Outstanding

Where NI = Net Income from P/L Statement and DIV = Dividend, RE1= REo+ NI1+ DIV1

ROE = Net income /# Shares of Common Stock Outstanding.

NPV 1 = [-Io + (C/rCE)] / (rCE -g)

If we compare it with the traditional NPV formula

-Io = Value of initial investment

(C/rCE) = present value formula for perpetuities where you assume that you are generating the net cash

inflow of C every year.

C = Forecasted Net Cash Inflow from Reinvestment = Io x ROE

Where ROE = Return on Equity = NI / Book Equity of Common Stock Outstanding

Range of Possible Outcomes, Expected Return:

Overall Return on Stock = Dividend Yield + Capital Gains Yield (Gordon’s Formula)

Expected ROR = <> = pi ri

Where pi represents the Probability of Outcome “i” taking place and ri represents the Rate of Return (ROR) if Outcome “i” takes place. The Probability gives weight age to the return. The Expected or Most Likely ROR is the SUM of the weighted returns for ALL possible Outcomes.

Stand Alone Risk of Single Stock Investment:

Risk = Std Dev = ( r i - <> )2 p i . = Summed over each possible outcome “ i ” with return “r i ” and probability of occurrence “p i .” <> is the Expected (or weighted average) Return

Possible Outcomes Example Continued:

Measuring Stand Alone Risk for Single Stock Investment

Std Dev = δ = √ Σ (r i - <>) 2 p i.

Coefficient of Variation (CV):

= Standard Deviation / Expected Return.

CV = σ/ <>.

<> = Exp or Weighted Avg ROR = pi ri

Risk Basics

Risk = Std Dev = σ = √ ( r i - <> )2 p i . = “Sigma”

Types of Risks for a Stock:

Types of Stock-related Risks which cause Uncertainty in future possible Returns & Cash Flows:

Total Stock Risk = Diversifiable Risk + Market Risk

Portfolio Rate of Return

Portfolio Expected ROR Formula:

rP * = r1 x1 + r2 x2 + r3 x3 + … + rn xn .

Stock (Investment) Portfolio Risk Formula:

p = √ XA2 σ A 2 +XB2 σ B 2 + 2 (XA XB σ A σ B AB)

Efficient Portfolios:

rP * = xA rA + xB rB + xC rC

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Monday, December 6, 2010

Multiple-Choice Quiz

Chapter 6: Financial Statement Analysis

Multiple-Choice Quiz

Chapter 22: Convertibles, Exchangeables, and Warrants

Multiple-Choice Quiz

Chapter 21: Term Loans and Leases

Multiple-Choice Quiz

Chapter 20: Long-Term Debt, Preferred Stock, and Common Stock

Multiple-Choice Quiz

Chapter 19: The Capital Market

Multiple-Choice Quiz

Chapter 18: Dividend Policy

Multiple-Choice Quiz

Chapter 17: Capital Structure Determination

Multiple-Choice Quiz

Chapter 16: Operating and Financial Leverage

Multiple-Choice Quiz

Chapter 15: Required Returns and the Cost of Capital

Multiple-Choice Quiz

Chapter 14: Risk and Managerial Options in Capital Budgeting

Multiple-Choice Quiz

Chapter 13: Capital Budgeting Techniques

Multiple-Choice Quiz

Chapter 12: Capital Budgeting and Estimating Cash Flows

Multiple-Choice Quiz

Chapter 11: Short-Term Financing

Multiple-Choice Quiz

Chapter 10: Accounts Receivable and Inventory Management

Multiple-Choice Quiz

Chapter 9: Cash and Marketable Securities Management

Multiple-Choice Quiz

Chapter 8: Overview of Working Capital Management

Multiple-Choice Quiz

Chapter 7: Funds Analysis, Cash Flow Analysis, and Financial Planning

Saturday, December 4, 2010

Multiple-Choice Quiz

Chapter 5: Risk and Return

Multiple-Choice Quiz

Chapter 4: The Valuation of Long-Term Securities

Multiple-Choice Quiz

Chapter 3: The Time Value of Money

Multiple-Choice Quiz

Chapter 2: The Business, Tax, and Financial Environments

Multiple-Choice Quiz

Chapter 1: The Role of Financial Management

Wednesday, December 1, 2010

Saturday, November 27, 2010

Wednesday, November 24, 2010

Thursday, November 11, 2010

Tuesday, November 9, 2010

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