ACC501 Solved Long Questions Mega File

ACC501 Business Finance · Composed By Faheem Saqib · A mega File of Long solved Qustions · Short Questions Answers of ACC501

What is the basic goal of a corporation?

Answer: The traditional answer is that the managers of the corporation are obliged to make efforts to maximize shareholder wealth. Alternatively, the goal of the financial manager is to maximize the current value per share of the existing stock.

Question: What is the difference between Gross Working Capital and Net Working Capital?

Answer: The term Gross Working Capital refers to total current assets whereas Net Working Capital is equal to total current assets minus total current liabilities.

Question: What role a Financial Manager is supposed to play ?

Answer: To create value, the financial manager should: - try to make smart investment decisions. - try to make smart financing decisions.

Question: How many kinds are there of business structures?

Question: What kind of roles Treasure and Controller play under Chief Financial Officer (CFO)?

Answer: A treasurer plays role of a financial manager whereas a controller plays role of an accountant.

Question: Is Finance important for other areas of the firm?

Answer: Yes, Finance is as important for other areas as it is for the finance section of a firm.

Question: What are the four basic areas of Finance?

Answer: Four basic areas of Finance include: - Business Finance - Investment - Financial Institution - International Finance

Question: What ultimate objective should be achieved by making a capital structure?

Answer: The ultimate objective while making a capital structure is to maximize the overall value of the firm.

Question: What is meant by the term "Capital Budgeting"?

Answer: Capital Budgeting is the process of planning expenditures on assets whose cash flows are expected to extend beyond one year. In other words, the process of planning and managing a firm's long-term investments.

Question: How the business structure "Sole-Proprietorship" will be defined?

Answer: Question: How the business structure " Partnership" will be defined?

Question: How the business structure "Corporation" will be defined?

Answer: managers, having unlimited life, easy transferability of ownership, and limited liability.

Q43. ( Marks: 3 )

Write down the components of total return in terms of dividend growth model. Answer R = D1 /P0 + g This tells us that the total return, R, has two components D1/P0 is called the Dividend Yield. Because this is calculated as the expected cash dividend by the current price, it is conceptually similar to the current yield on a bond Growth rate, g, is also the rate at which the stock price grows. So it can be interpreted as

capital

gains yield

Q44. ( Marks: 3 )

What is the difference between operating cycle and cash cycle? The operating cycle is the sum of the inventory and receivable periods Operating cycle Inventory period Receivable period

Cash cycle

•The time between cash disbursement and cash collection. (We spend cash on day 30, but don't collect until day 105. so we have to arrange finances $1,000 for 105 - 30 = 75 days) •So we can describe the cash cycle as: Cash cycle = Operating cycle Accounts payable period 75 days = 105 days - 30 days

Q45. ( Marks: 3 )

How a firm s overall cost of capital is calculated ?

We know that a firm’s overall cost of capital will reflect the required return on the firm’s assets as a whole. •Given that a firms uses both debt and equity capital, this overall cost of capital will be a mixture of the returns needed to compensate its creditors and stockholders.