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HINTS FM QUIZ

January 30, 2016

Indirect suggestions for quizzes:-

Hint 1: Beta is a numeric value that measures the fluctuations of a stock to changes in the overall stock market.
SML is the representation of the capital asset pricing model. It displayed the expected return of an individual security as a function of systematic, non-diversifiable risk.

Hint 2: Market risk: Is the risk that the value of an investment will decrease due to moves in market factors.
Systematic risk: Is vulnerability to events which affect aggregate outcomes such as broad market returns, total economy- wide resource holdings, or aggregate income.

Unsystematic Risk: Company- or industry-specific hazard that is inherent in each investment.

Diversifiable risk: Investment risk that can be reduced or eliminated by combining several diverse investments in a portfolio.

Hint 3: To calculate the future value of the annuity, we have to calculate the future value of each cash flow.

Hint 4: All sources of capital, including common stock, preferred stock, bonds and any other long-term debt, are included in a WACC calculation.

Hint 5: It is a measure of how much cash a business generates after accounting for capital expenditures such as building or equipment. This cash can be used for expansion, dividends, reducing debts, or other purposes.

Hint 6: IRR is calculated using the NPV formula by solving for R if the NPV equals 0.

Hint 7: The question says payments are received from today (BEGINNING MODE of payment).

Hint 8: The Effective annual interest rate is equal to 1 plus the nominal interest rate in percent divided by the number of compounding periods per year n, to the power of n, minus 1.

Hint 9: Interest should be calculated on average balance during the year.

Hint 10: It’s a compounding of interest using the shortest possible interval of time.

Hint 11: NPV expressed in Absolute terms and IRR expressed in percentage terms.

Hint 12: A circular referencing is a series of references where the last object references the first, resulting in a close loop.

Hint 13: Forward integration: A business strategy that involves a form of vertical integration whereby activities are expanded to include control of the direct distribution of its products.

Backward integration: It refers to company buying or internally producing parts of its supply chain.

Conglomerate: A merger between firms that are involved in totally unrelated business activities.

Concentric: A company acquires or creates new products or services to reach more consumers.

Hint 14: It is simply a formula based question.

Hint 15: Deferred tax liability: Is a balance sheet line item that accounts for the temporary difference between taxes that will come due in the future and taxes paid today.

Deferred Tax Asset: Is an asset on a company’s balance sheet that may be used to reduce taxable income. It is the opposite of a deferred tax liability, which describes something that will increase income tax.

Income Tax Payable: Is calculated according to the prevailing tax law in the company’s home country.

Advance tax: Is the income tax payable if your tax liability exceeds Rs 10,000 in a financial year.

Indirect suggestions for quizzes:-

Hint 1: Beta is a numeric value that measures the fluctuations of a stock to changes in the overall stock market.

SML is the representation of the capital asset pricing model. It displayed the expected return of an individual security as a function of systematic, non-diversifiable risk.

Hint 2: Market risk: Is the risk that the value of an investment will decrease due to moves in market factors.

Systematic risk: Is vulnerability to events which affect aggregate outcomes such as broad market returns, total economy- wide resource holdings, or aggregate income.

Unsystematic Risk: Company- or industry-specific hazard that is inherent in each investment.

Diversifiable risk: Investment risk that can be reduced or eliminated by combining several diverse investments in a portfolio.

Hint 3: To calculate the future value of the annuity, we have to calculate the future value of each cash flow.

Hint 4: All sources of capital, including common stock, preferred stock, bonds and any other long-term debt, are included in a WACC calculation.

Hint 5: It is a measure of how much cash a business generates after accounting for capital expenditures such as building or equipment. This cash can be used for expansion, dividends, reducing debts, or other purposes.

Hint 6: IRR is calculated using the NPV formula by solving for R if the NPV equals 0.

Hint 7: The question says payments are received from today (BEGINNING MODE of payment).

Hint 8: The Effective annual interest rate is equal to 1 plus the nominal interest rate in percent divided by the number of compounding periods per year n, to the power of n, minus 1.

Hint 9: Interest should be calculated on average balance during the year.

Hint 10: It’s a compounding of interest using the shortest possible interval of time.

Hint 11: NPV expressed in Absolute terms and IRR expressed in percentage terms.

Hint 12: A circular referencing is a series of references where the last object references the first, resulting in a close loop.

Hint 13: Forward integration: A business strategy that involves a form of vertical integration whereby activities are expanded to include control of the direct distribution of its products.

Backward integration: It refers to company buying or internally producing parts of its supply chain.

Conglomerate: A merger between firms that are involved in totally unrelated business activities.
Concentric: A company acquires or creates new products or services to reach more consumers.

Hint 14: It is simply a formula based question.

Hint 15: Deferred tax liability: Is a balance sheet line item that accounts for the temporary difference between taxes that will come due in the future and taxes paid today.

Deferred Tax Asset: Is an asset on a company’s balance sheet that may be used to reduce taxable income. It is the opposite of a deferred tax liability, which describes something that will increase income tax.

Income Tax Payable: Is calculated according to the prevailing tax law in the company’s home country.

Advance tax: Is the income tax payable if your tax liability exceeds Rs 10,000 in a financial year.

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