Test Yourself

Chapter 1: Overview of Financial Management
Chapter 2 - From Scorekeeping to Financial Statements
Chapter 3 - Analyzing Changes in Financial Statements
Chapter 4 - Financial Statement Analysis
Chapter 5 - Profit Planning and Decision-Making
Chapter 6 - Cost of Capital and Capital Structure
Chapter 7 - Time Value of Money
Chapter 8 - Capital Investment Decisions
Chapter 9 - Budgeting, Financial Planning, and Controlling
Chapter 10 - Sources and Forms of Financing
Chapter 11 - Working Capital Management
Chapter 12 - Business Valuation

Chapter 1: Overview of Financial Management

Objective 1: Define the meaning of financial management.
Objective 2: Identify the individuals responsible for the finance function.
Objective 3: Explain the four financial objectives.
Objective 4: Comment on the three major types of business decisions.

Chapter 2 - From Scorekeeping to Financial Statements

Objective 1: Understand the bookkeeping and accounting process.
Objective 2: Explain the activities related to bookkeeping.
Objective 3: Comment on three financial statements.
Objective 4: Discuss the content of the auditor’s report.
Objective 5: Explain the meaning of analysis in financial management.
Objective 6: Discuss the meaning of decision-making in financial management.
Objective 7: Differentiate between cash accounting and accrual accounting.
Objective 8: Give an overview of corporate taxation in Canada.
Objective 9: Differentiate between depreciation methods, capital cost allowance, and amortization.
Objective 10: Explain the meaning of deferred taxes.
Objective 11: Differentiate between net income after taxes and cash flow.
Objective 12: Discuss the meaning of working capital.

Chapter 3 - Analyzing Changes in Financial Statements

Objective 1: Explain why it is important to examine the changes in the flow of funds in financial statements.
Objective 2: Identify the key elements of funds flow.
Objective 3: Analyze funds flow by comparing two consecutive balance sheets.
Objective 4: State the basic rules that can be used to identify funds flow.
Objective 5: Explain the statement of changes in financial position.

Chapter 4 - Financial Statement Analysis

Objective 1: Explain why ratios are used to analyze financial statements.
Objective 2: Analyze financial statements by using meaningful ratios.
Objective 3: Evaluate a company's balance sheet and income statement by using common-size statement analysis.
Objective 4: Evaluate a company's balance sheet and income statement by using horizontal statement analysis.
Objective 5: Describe how financial benchmarks can be used to measure and improve a company's financial performance.
Objective 6: Examine financial statements by using the Du Pont financial system.
Objective 7: Comment on the limitations of financial ratios.

Chapter 5 - Profit Planning and Decision-Making

Objective 1: Explain the relevance of break-even analysis.
Objective 2: Differentiate between cost behaviour: fixed, variable, and semi-variable costs.
Objective 3: Make the connection between the anatomy of profit: the relationship between revenue and costs.
Objective 4: Explain the break-even analysis in terms of the contribution margin, the relevant range, and the relevant costs.
Objective 5: Draw the break-even chart.
Objective 6: Calculate the break-even point, the cash break-even point, and the profit break-even point.
Objective 7: Show how the break-even point can be applied in different organizations.
Objective 8: Indicate how the break-even wedge can be used to analyze a company's profit performance.
Objective 9: Differentiate between different types of cost concepts such as committed and discretionary costs, controllable and noncontrollable costs, and direct and indirect costs.

Chapter 6 - Cost of Capital and Capital Structure

Objective 1: Define the meaning of financial structure and capital structure.
Objective 2: Explain the meaning of cost of financing and how it is calculated.
Objective 3: Explain the meaning of the economic value added concept and how it is calculated.
Objective 4: Calculate the cost of capital and explain the leverage concept.
Objective 5: Explain the interdependence of the major areas of finance.
Objective 6: Calculate the cost of capital for publicly owned companies and the characteristics of the long-term financing sources.
Objective 7: Make the connection between the marginal cost of capital and investment decisions.
Objective 8: Explain the importance of leverage analysis and how it is calculated.

Chapter 7 - Time Value of Money

Objective 1: Discuss why money has a time value.
Objective 2: Differentiate between time value of money and inflation.
Objective 3: Differentiate between time value of money and risk.
Objective 4: Explain how to use time and cash in investment decisions.
Objective 5: Comment on using interest tables to calculate investment decisions.
Objective 6: Apply interest tables when making capital investment decisions.

Chapter 8 - Capital Investment Decisions

Objective 1: Comment on the reasons capital projects are critical.
Objective 2: Differentiate between compulsory investments and opportunity investments.
Objective 3: Explain the capital budgeting process.
Objective 4: Comment on the key elements used to gauge capital projects.
Objective 5: Evaluate capital investment decisions by using time-value yardsticks.
Objective 6: Assess capital investment budgeting techniques that measure risk.
Objective 7: Explain why capital projects are not approved.

Chapter 9 - Budgeting, Financial Planning, and Controlling

Objective 1: Describe the reasons for budgeting and the responsibility-centre concept.
Objective 2: Explain the budgeting process within the overall planning framework.
Objective 3: Present the different types of budgets.
Objective 4: Show how budgeting can become an effective management exercise.
Objective 5: Discuss why cost accounting is essential for managers.
Objective 6: Describe financial planning in terms of preparing pro-forma financial statements.
Objective 7: Explain the meaning of sustainable growth and how it can be calculated.
Objective 8: Evaluate the financial health of a business and how it is calculated.
Objective 9: Comment on the importance of controlling, the control system, and the different types of controls.

Chapter 10 - Sources and Forms of Financing

Objective 1: Make the distinction between financial needs and financing requirements.
Objective 2: Differentiate between internal financing and external financing.
Objective 3: Differentiate between the different types of risks-related financing options (ownership versus debt).
Objective 4: Comment on the various forms and sources of financing.
Objective 5: Identify the most important short-term lenders.
Objective 6: Discuss the sources of intermediate and long-term investors.
Objective 7: Comment on the different categories of equity financing.
Objective 8: Comment on the factors that influence businesses when choosing between buying or leasing an asset.

Chapter 11 - Working Capital Management

Objective 1: Define terms such as "working capital", "net working capital," and "working capital management."
Objective 2: Comment on the importance of managing cash.
Objective 3: Identify different strategies related to managing marketable securities.
Objective 4: Discuss the importance of accounts receivable management and describe related techniques.
Objective 5: Explain the importance of inventory management and describe related techniques.
Objective 6: Show how current liabilities can be managed.

Chapter 12 - Business Valuation

Objective 1: Differentiate between market value and book value.
Objective 2: Discuss the various valuation models.
Objective 3: Comment on the meaning of scanning the environment.
Objective 4: Explain how to go about documenting planning assumptions.
Objective 5: Show how to restate the income statement and the balance sheet.
Objective 6: Present the various ways of price-tagging an ongoing business.
Objective 7: Calculate the market value of publicly traded companies.