Short paragraph answers should do the trick; a few questions will need more. Put as much as you can into your own words.

1. How is the income statement related to the balance sheet?

2. Explain how the DuPont system of analysis breaks down return on assets and how it breaks down the return on stockholders equity.

3. Rapid corporate growth in sales and profits can cause financing problems. Explain.

4. Discuss the various uses of break-even analysis.

5. What does a firm expect when it uses short-term financing to finance long-term assets? What happens to risk?

6. How do financial analysts determine the current value (price) of different kinds of stock? Describe the different approaches to common stock valuation.

7. Why is only the systematic risk value of a stock rewarded and how is it measured?

8. Explain the use of Payback, NPV, and IRR in evaluating investments in projects.

9. How does a firm calculate its cost of capital for funding?

10. How does the Federal Reserve create money through banks? (Remember this is different than printing money done by the Treasury).