Statistics and Risk
Management
Forecast Data
Video URL:
jukebox.esc13.net/untdeveloper/Videos/Forecast%20Data.mov
Vocabulary List:
Capital Structure: how a company organizes its debt-to-equity ratio
Bonds: a certificate of debt issued by an entity, repayable at a fixed interest
rate to the bondholder, who acts as the lender.
Maturity Date: the date of the final payment of principle and interest on a
loan or bond.
Discount Bond: a bond that is sold at a price that is less than the bond’s
face value.
Premium Bond: a bond that is sold at a price that is more than the bond’s
face value.
Municipal Bonds: a bond issued a local government entity.
Common Stock: a share of the ownership of a company that can increase or
decrease in value.
Preferred Stock: a bond-like share of a company’s ownership that pays a
fixed dividend.
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Resources:
Convertible Bonds and other Convertible Securities
Basic definitions and a link to a case study involving convertible bonds.
http://people.stern.nyu.edu/igiddy/convertibles.htm
Equity Financing
While most business owners are familiar with traditional financing
available through local banks, there are many other sources of capital
that can meet your needs for growth and expansion.
http://www.mbda.gov/node/432
Introduction – Sources of Finance
This article explores the different sources of internal and external
financing along with multiple other sources of financing. It provides
descriptions and or links to descriptions to the different types of internal
and external sources for further reading.
http://www.bized.co.uk/learn/accounting/financial/sources/index.htm
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Forecast Data Practice Test
Name:_____________________
DECIDE IF THE FOLLOWING LISTED IS AN ASSET OR LIABILITY: 1. Cash A. Asset 2. Accounts Payable A. Asset 3. Inventory A. Asset 4. Accounts Receivable A. Asset 5. Short Term Notes A. Asset 6. Accrued Expenses A. Asset B. Liability B. Liability B. Liability B. Liability B. Liability B. Liability MATCHING: A.
B.
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Bond Preferred Stock Common Stock Stock Split Shares __________ A form of equity security that represents the residual ownership of the firm __________ Units of ownership __________ A stock dividend exceeding 25% of the number of shares currently outstanding __________ Class of stock that pays fixed and regular interest income, instead of a dividend __________ A long‐term promissory note issued by a borrower, promising to pay the owner of the security a predetermined amount of interest each year Copyright © Texas Education Agency, 2012. All rights reserved.
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Forecast Data Practice Test
Name:______________________
MULTIPLE CHOICE: 12. The money used to pay for the everyday trading activities carried out by the business. A. Finances B. Working Capital C. Personal Savings D. Operations 13. Short term sources of finance such as stocks, debtors and cash the business has at any one time are defined as ____________. A. Current Assets B. Working Capital C. Current Liabilities D. Operations 14. Short term requirements for cash including trade and expense creditors or tax and dividend owing are defined as ______. A. Current Assets B. Working Capital C. Current Liabilities D. Operations 15. The ____ of a share is the issue value of the share. A. Premium B. Par C. Nominal Value D. Market Value 16. The ______ of a share is the amount at which a share is being sold on the stock exchange. A. Premium B. Par C. Nominal Value D. Market Value 17. ________ is the legal agreement between the firm issuing the bonds and the bond trustee who represents the bondholders. A. Indenture B. Priority of Claim C. Par Value D. Call Provision 18. The ________ provides the issuer of the bond with the right to redeem or retire a bond before it matures. A. Indenture B. Priority of Claim C. Par Value D. Call Provision 19. _____ is the principal that must be repaid to the bondholder at maturity. A. Indenture B. Priority of Claim C. Par Value D. Call Provision 20. The ratio of the annual interest payment to the bond’s current market price is the ________. A. Par Value B. Face Value C. Current Yield D. Call Provision Copyright © Texas Education Agency, 2012. All rights reserved.
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Forecast Data Practice Test Key
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A B A A B B C E D B A B A C C D A D C C Copyright © Texas Education Agency, 2012. All rights reserved.
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Student Assignment
11.1a Using Corporate Bonds
Name:_____________________
As the Vice President of Financial Operations for a New GMC Truck
Dealership, you have been assigned the task of determining what kind
of operational capital will be needed.
You have estimated sales for the first 6 months of $5,500,000.00
You expect a 6 month payroll of $300,000.00
Other Expenses for 6 months of $200,000.00
You have to buy $7,000,000.00 of inventory that will be delivered over
the six months. However, General Motors has a floor plan where you
have to pay about $1,000,000.00 per month for the vehicles.
Using these figures, how much cash would you have at the end of the
six months assuming you had $1,000,000.00 in cash to start out with.
Should you borrow more to fund the remaining operations for the fiscal
year?
What are your explanations for your conclusions?
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What are your explanations for your conclusions?
Student Assignment
11.2a Using Corporate Bonds
Name:_____________________
As CFO of a large Corporation you are charge will be selling corporate
10 year bonds with a face value of $20,000,000.00.
The bonds will pay investors 6.75% per year. However, the brokerage
company will receive 1% for handling the bonds and the bonds sold with
a discount of 4.23%.
How much did you initially raise from the sales of these bonds (less fees
and discount)?
What was the amount of interest on the bonds you will pay for each of
the 10 years?
What is the effective rate of interest based upon the discounted yield for
each of the three years?
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Student Assignment
11.3a Using Corporate Stocks
Name:_____________________
Your company has been very successful. The company’s common stock
price has reflected your success. Currently, a single share of your
company sells for $289.78. Your board of directors believes that the
stock price is too high for the average investor to find appealing. They
have suggested a stock split of 3 to 1.
You company has 1,300,000 shares of capital stock on hand. They have
issued 2,700,000 shares through IPOs in the past.
After they split the stock value by 3 by issuing 3 shares for every one that
exists, what will be the immediate value of a share?
Because the shares are more affordable, the price of the individual share
rises to $104.98 within a month. How much total value has your
company made on the shares of capital stock they have in their treasury
from this increase?
The administrative cost of the Stock Split was $500,000.00. Was the
split worth it to your Company?
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Explore Activity:
Technology – In the assignments for this section you explored different
aspects of finance for different circumstances. For this Explore More, you
are going to set up an Excel spreadsheet to answer the questions in
Assignments 11.1a-11.3a. In addition to producing the spreadsheet, you will
write a short paper (no more than one page) in which you show and
describe the formulas you used for each assignment.
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