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:
- Chapter 2; Read everything
- Chapter 3: Read everything
- 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
-
Chapter 5: pages 116-134; skip Valuing an Asset with
Contingent Cash Flows; pages 141-146 (section on Market Prices and
Value).
- 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:
-
Are poison pills generally good or bad for stockholders?
(See page 20 for answer.)
-
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.)
-
Give an example of diversifiable risk.
2. Use no more than two sentences to define the following
terms:
-
market portfolio
-
beta
-
market efficiency
-
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?
Ans.
- 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.
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