AFM373 Study Guide - Final Guide: Control Premium, Efficient-Market Hypothesis, Golden Parachute

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM373
• Professor: Alan Douglas

Document Summary

Analysis of alternatives against criteria decision action plan. Need to understand what we need to maximize a clear definition. Corporations should have a single-valued objective function, one over-riding goal value maximization. Enlightened value maximization: long-term value maximization is the overriding goal used to make trade-offs among stakeholders. Balanced scorecard: managerial equivalent of stakeholder theory (bad) Be(cid:374) a(cid:374)d je(cid:396)(cid:396)(cid:455)(cid:859)s: e(cid:454)a(cid:373)ple of t(cid:396)(cid:455)i(cid:374)g to i(cid:373)ple(cid:373)e(cid:374)t stakeholder theory (conflicting goals) Do(cid:374)(cid:859)t just take (cid:449)hat the(cid:455) offe(cid:396)ed up f(cid:396)o(cid:374)t. Schumpeter: creative destruction jensen: free capital markets w/ value maximization as the long term objective is the best decision for everybody! For any ratios, need to consider trend, not just absolute value! Look @ the (cid:272)o(cid:373)pa(cid:374)(cid:455)(cid:859)s gro(cid:449)th: growth in net income/sales/ assets. Look @ profitability: return on invested capital/roe/roa/net income margin and gross profit margin. Look @ leverage: d/e ratio the b/s view of leverage /interest coverage ratio the i/s view of leverage. Look @ efficiency in resources: asset turnover/fixed asset turnover/receivables days/inventory days/payables.