FIN 502 Chapter 6: Chapter 6.docx

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jademallard37

14 Mar 2012

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Chapter 6: the life cycle and financial intermediation. The financial life cycle: is the lifetime pattern of these stages- people have limited life expectancy, and during their lives they go through stages of differing financial positions and earning power. Early in your lifecycle, your consumption is likely to exceed your income at least some of the time (more likely to debt) As you proceed through the life cycle, you start to earn more than you consume. As children become independent and you pay your debts off, you find yourself with surplus income, or savings. Retirement is when your earning power becomes very low or zero. Group families into different categories in the family life cycle by looking at age and other factors. Useful for identifying and analyzing demand for consumer financial services, captures the effect of income patterns in the financial life cycle even thought they are more directly related to age.

Related Questions

What are the economic functions that financial intermediaries and markets perform that benefit society? In your answer, discuss the relationships of financial intermediaries and financial markets to the savings investment process within an economy and to each other. In addition, provide in your discussion an analysis of the differences in preferences among economic agents as an explanation for the wide variety of primary and secondary securities found in financial markets and the reasons for federal and state regulation of depository institutions and other financial intermediaries. In this regard, consider what role asset-backed securities, securitization and the secondary markets for these instruments play in the efficiency of the financial intermediation process. For example, the mortgage-backed securities secondary marketsâ development and the funds flows to finance home ownership. In this discussion consider the role of interest rates in determining the demand for current and future consumption and the relationship of this to individual and aggregate saving.

List five different categories of financial ratios and provide at least two examples of each type of ratio. Discuss how ratio analysis is useful in analyzing the performance of companies and discuss any limitations or drawbacks to relying on ratio analysis.

bronzealpaca999

A financial analyst is attempting to assess the future dividend policy of Environmental Systems by examining its life cycle. She anticipates no payout of earnings in the form of cash dividends during the development stage (I). During the growth stage (II), she anticipates 11 percent of earnings will be distributed as dividends. As the firm progresses to the expansion stage (III), the payout ratio will go up to 31 percent, and eventually reach 51 percent during the maturity stage (IV).

a.	Assuming earnings per share will be as follows during each of the four stages, indicate the cash dividend per share (if any) during each stage. (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations and round your answers to 2 decimal places.)


Stage I	$	.45
Stage II		1.75
Stage III		2.30
Stage IV		3.60

	Dividends
Stage I	$
Stage II	$
Stage III	$
Stage IV	$

b.	Assume in Stage IV that an investor owns 325 shares and is in a 15 percent tax bracket. What will be the investorâs aftertax income from the cash dividend? (Do not round intermediate calculations and round your answer to 2 decimal places.)

Aftertax income

In what two stages is the firm most likely to utilize stock dividends or stock splits? (Select two answers. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)

	Stage I
	Stage II
	Stage III
	Stage IV

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FIN 502 Chapter 6: Chapter 6.docx

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