1. 1 Corporate Finance Review for Midterm #1 Professor Scott Hoover Management 221

2. 2 Introduction  What must a financial manager understand? …must understand how to value future cash flows …must understand how to evaluate the health of a firm …must understand how to forecast and plan accordingly …must understand how to identify optimal financing arrangements …must understand how to evaluate potential investments  Firm managers the ideal goal of firm managers agency costs

3. 3 Time Value of Money  Basic intuition  Present value of cash flows single cash flow annuities growing annuities  Future value of cash flows single cash flow annuities growing annuities  Applications

4. 4 Financial Statement Analysis  What questions are important in assessing the health of a firm? Can the firm meet its debt obligations? How well are assets being managed? How risky is the firm? How profitable is the firm? What does the market think of the firm?  The DuPont Approach  Ratios  Common Size and Indexed Statements

5. 5 Approximate Exam Structure  8 questions Topics  2 General (20 points)  4 Time Value of Money (40 points)  2 Financial Statement Analysis (40 points) Type  2 Short Answers  4 Numerical Calculations  2 Analytical Essays (FSA)  Annuity formulas and ratio “definitions” will be provided.  Note: Your answers must be concise.