Mini Case #1
You have been recently hired as a consultant to Tire City Inc (TCI) a company that is seeking to increase its value. TCI has asked you to prepare material for a seminar in finance for non- financial managers to be delivered to selected members of its middle and top management. The senior management of TCI would like for you first to structure the initial sections of your presentation around the following questions.
1) Explain what the three major areas in finance are. In other words if one majored in finance, what are the three major types of job he/she could look for?
2) Could someone do a good job in one area of finance without a good knowledge about the other areas? (give some examples)
3) Why should corporate finance be important to all managers?
4) What should be the primary objective of managers?
5) What is a financial market? How are financial markets differentiated from markets for physical (tangible) assets? How are financial markets differentiated from money markets?
6) Who are the providers (savers) and users (borrowers) of capital? How is capital transferred between savers and borrowers?
7) There are two primary groups of investors for a firm s securities; shareholders and creditors. What are the primary differences between the two groups?
8) Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form.
9) What is the total value of a corporation? Who has claims on this value?
10) Is there any potential conflict of interest between shareholders and managers? Between shareholders and creditors?
11) Assume that there is a situation where TCI has 10 million of excess cash. What should the CFO do with these funds?
12) What three aspects of cash flows affect the value of any investment?
13) What is depreciation? Why depreciation expenses must be included in the Income Statement? What effect does depreciation have on the firm s cash flow?
14) Describe three ways that pro forma statements are used in financial planning.
15) Explain the steps in financial forecasting.
16) How would changes in these items affect the AFN? (1) Sales increase, (2) the dividend payout ratio increases, (3) the profit margin increases, (4) the capital intensity ratio increases, and (5) TCI begins paying its suppliers sooner. (Consider each item separately and hold all other things constant.)
17) Briefly explain how to forecast financial statements using the percent of sales approach.
(Make sure to explain how to forecast interest expenses.)
I need you to answer for me the questions just briefly..
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