Questions from Managerial Accounting

Q: As the discount rate increases, the present value of a given

As the discount rate increases, the present value of a given future cash flow also increases.Do you agree? Explain.

Q: Assume that two companies in the same industry have equal earnings.

Assume that two companies in the same industry have equal earnings. Why might these companies have different price-earnings ratios? If a company has a price-earnings ratio of 20 and reports earnings p...

Q: How is the project profitability index computed, and what does it

How is the project profitability index computed, and what does it measure?

Q: What is meant by the term payback period? How is the

What is meant by the term payback period? How is the payback period determined? How can the payback method be useful?

Q: What is the major criticism of the payback and simple rate of

What is the major criticism of the payback and simple rate of return methods of making capital budgeting decisions?

Q: Would a sale of equipment for cash be considered a financing activity

Would a sale of equipment for cash be considered a financing activity or an investing activity?Why?

Q: A company seeking a line of credit at a bank was turned

A company seeking a line of credit at a bank was turned down. Among other things, the bank stated that the company’s 2 to 1 current ratio was not adequate. Give reasons why a 2 to 1 current ratio migh...

Q: Distinguish between horizontal and vertical analysis of financial statement data.

Distinguish between horizontal and vertical analysis of financial statement data.

Q: What is the basic purpose for examining trends in a company’s financial

What is the basic purpose for examining trends in a company’s financial ratios and other data? What other kinds of comparisons might an analyst make?

Q: Would you expect a company in a rapidly growing technological industry to

Would you expect a company in a rapidly growing technological industry to have a high or low dividend payout ratio?