Revision

REVISION: DMS FIN101 Business Finance

This Revision Guide/Check List/Practice Questions is/are to assist the students in their

preparations for their own revision. This guide is not meant to be comprehensive. Rather, it

serves to guide students to key points in the course. All materials in the study pack, unless

specifically stated otherwise, will be included in the examinations.

Use the 5 Ws as a guide:

1) What? What is the issue?

2) Who? Who is/are involved?

3) When? Under what circumstances?

4) Why? Why is there a problem? The causes?

5) hoW? hoW can we solve the problem?

Lecture 1

You need to know the job nature of the financial manager, who has to make decisions on a cash

flow basis. He/she must take into account of the tradeoff between risk and return, and the goal of

the firm. Due to his/her position in the company, he/she must discharge his/her duties in an

ethical manner. At the same time, the firm must address the agency problem, and find ways to

align the managers’ interests with the shareholders.

Lecture 2 & 3

You need to be able to calculate all the financial ratios of the firm. The formulae sheet will be

provided in the examinations. You will be required to do a time-series and cross-sectional

analysis. Use the “good”, “ok”, and “poor” categories to help you. Remember to summarize the

analysis, linking all the relevant issues together in a logical and sequential manner. Nevertheless,

you also need to be aware of the limitations of ratio analysis.

You must be able to calculate the EVA of a firm and interpret on whether the investment

contributes to the wealth of the firm.

Lecture 4 & 5

In managing a firm’s NWC, the firm must be aware of the tradeoffs between having its liquidity

risk and the return for the firm. Having more current assets gives the firm more buffer to pay off

its current liabilities, but the firm would experience lower returns due to low returns from current

assets.

You must be able to calculate the...