Dr. P.V. Viswanath



Economics/Finance on the Web
Student Interest

  Courses / FIN 647  

Frequently Asked Questions

FIN 647: Advanced Financial Analysis



Q. What can you tell us about the quizzes?
Ans.  The quiz on Present Value will include two problems; both problems will be based on problems found at the end of chapters 3 and 5.

Q. What do I have to study for the midterm?
Ans. The midterm will cover Chapters 2 through 7.  You are responsible for all of the material on the slides.  In addition, whether it is covered on the slides or not, you should cover the following material:

  1. Chapter 2; Read everything
  2. Chapter 3: Read everything
  3. Chapter 4: p. 68 - 88
  • Basic Accounting Statements
  • Informational Needs

Asset Measurement and Valuation

    • Accounting Principles Underlying Asset Management
    • Measuring Asset Value
      • Fixed Assets
      • Current Assets
      • (read -- it will be useful for you, but I won't ask questions on this) Investments and Marketable Securities
      • Intangible Assets
    • How Well do Accountants Categorize Assets and Measure Value?
      • Value of Assets-in-Place
      • Value of Growth Assets
      • Accounting for Acquisitions
      • Valuing the Research Asset
  • Measuring Financing Mix
    • Accounting Principles Underlying Liability and Equity Measurement
    • Measuring the Value of Liabilities and Equities
      • Current Liabilities
      • Long-Term Debt
      • Other Long-Term Liabilities
        • Leases
        • (skip Employee Benefits and Deferred Taxes)
      • (skip Preferred Stock)
      • Equity
    • How well do Accountants measure the Financing Mix of the Firm?
      • Classification into Debt and Equity
      • Valuation of Debt and Equity
      • Operating Leases, Capital Leases and Debt
  1. Chapter 5: pages 116-134; skip Valuing an Asset with Contingent Cash Flows; pages 141-146 (section on Market Prices and Value).

  2. Chapter 6: pages 149-154; do the section "Diversifiable and Non-diversifiable Risk," including the subsections:
  • The Components of Risk
  • Why Diversification Reduces or Eliminates Firm-Specific Risk: An Intuitive Explanation
  • A Statistical Analysis of How Diversification Reduces Risk
  • Why is the Marginal Investor Assumed to be Diversified
  •         Skip the rest of the chapter.

Chapter 7: Everything, except:

  • Riskless Rates when there is sovereign risk (p. 188)
  • Currency choices and real rates (p. 189)
  • (In the section on Historical Risk Premiums) The paragraph on p. 192 starting with "Although historical data on stock returns ..." upto the end of the section.  (The rest of the section on historical risk premiums is included.)

In the problems at the end of Chap. 7, skip Q. 1, do all other questions (under the rubric, Questions.)  Under the rubric, Problems, skip Problem 4; do all others.

All slides for Chapter 7.

Q. What will the format of the Midterm be?
A. Here is the format of the midterm:

  • One media article, with questions on Corporate Governance (chapter 2)

  • One quantitative question on present value (similar to questions from end of chapters 3, 5; but not necessarily following the paradigm precisely).

  • Question on definitions/explanations of terms (from assigned material).

  • One section with questions requiring brief answers (from Chapter 2, Chapter 4, , 5, 6 and 7).

Q. Give us a sample quiz.
A. Here is a sample short quiz:

1. Answer any two of the three questions below:

  1. Are poison pills generally good or bad for stockholders? (See page 20 for answer.)

  2. What is the Matching Principle in GAAP with respect to revenue recognition?  Explain how the use of the matching principle would make it more difficult for financial analysts to use accounting income as a measure of cashflows. (See page 90 for answer.)

  3. Give an example of diversifiable risk.  

2. Use no more than two sentences to define the following terms:

  1. market portfolio

  2. beta

  3. market efficiency

  4. operating lease

Q. Are the exams open book or closed book?
Ans. The midterm and the final exams are closed book; however, you can bring in one 8.5x11 sheet, which can contain only formulas. You may write on both sides of the paper.  However, you may not staple several sheets of paper together.  Going through your notes probably cannot make up for the lack of a proper understanding of the material.

The short quizzes are closed book.

Q. What do I have to study for the final exam?
Ans. The material below will, more or less, define what will be included for the final.

Chapter 16: Everything.  (For an intro to bonds, you can get either a powerpoint presentation or a straightforward text,  Valuing Bonds.)

Chapter 17: The section, entitled, "Financing Choices and a Firm's Life Cycle," pages 509-518.  Understanding the ideas behind figure 17.1 on page 512.

Chapter 18: Entire chapter.  You may want to look at the slides to get a better understanding of the material.

Chapter 19:

Chapter 21 and Slides on Dividends: Maybe one short question similar to the short questions on the Practice page.

There will be a media article based question, dealing with firm risk or capital structure; at least one problem involving capital structure, and probably some short questions.

Q. What will the format of the Final exam be?
Ans. The format of the Final will be as follows:

Q. Can I do extra work to improve my grade?
Ans. Sorry. I believe that in order to be fair, I have to give every student the same opportunity to do extra work. Obviously, this is not feasible.  However, on occasion I will allow you to resubmit an assignment for grade improvement.

Q. What can I do to check my understanding of the material and to prepare for the exams?

  • You can do the problems from the end of each chapter. The answers can be found on the Web.
  • You can also try quizzes from past terms. Frequently, the answers to quiz problems can also be found on my webpages.
  • You can try to answer the questions at the end of media articles.
  • You can read current newspaper and magazine articles on relevant topics and make up your own questions and articles.

Q. What do I have to study from each chapter?
Ans. In each chapter, you should know the definitions and the meanings of key terms, and be able to put them into context. In addition, you can find a list of important issues in each chapter, here. Note, however, that this is not necessarily exhaustive.

Updated August 27, 2003.


Return to FIN 647 Home Page

Return to P.V. Viswanath's Home Page