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1. Which three areas discussed in Chapter 1 are most important to you? Why are they important to you?

What is important to me in chapter 1 is to consider the costs of capital. Hawawini and Viallet (2011) define equity as “cash contributed by shareholders” (pg. 2) and debt capital as “cash contributed by lenders” (pg. 2). When a plan is going to be funded by these capitals it is important to consider that interest and tax will also need to be included in the amount barrowed. This is important because the business manager is not only paying back what is barrowed but also paying the tax and interest on it.

Before making a business decision the manager should answer the question on, will this plan create value? Before anyone starts to implement an idea costing money one should know what the return will be and will it be of value. A business manager must know ahead of time whether this idea will hit the bottom line. As described by Hawawini and Viallet (2011), the bottom line is the net profits.

As a business owner it is important to know that once an idea is implemented and is found to have profits it will attract other competitors to enter the market. These competitors are hopeful of getting the same return and decrease the business of others. A business manager must consider entry barriers. Hawawini and Viallet (2011) define entry barriers as “patents or trademarks on products that competitors are legally prevented from copying or imitating” (pg. 10). Having these barriers will help keep more profit in the company.

Hawawini, G., & Viallet, C. (2011). Finance for executives: Managing for value creation (4th ed.). Mason, OH: South-Western Cengage Learning.

Many of us in discussion question 1 identified the value to be of importance. This is really the first step before making an investment into something. Jenna when you mentioned about our work environment being obvious for value when we make purchases does seem to be true. As managers we are responsible for the budget as well as having the equipment necessary for our staff to perform safe patient care. What I also gathered from the reading is that not only do we think about the immediate use of the purchase but also long term return on it. For example, will we need this for a year?, will it last many years?, will it be outdated?, or is this the latest technology?. Reading this chapter helped me think a little more into the future of our investments. There is more to just the immediate gratification. If money is going to be spent we want to make sure we covered all of the "values".

2. Which three areas discussed in Chapter 2 are most difficult for you to understand? What have you tried to understand these materials?

One of the areas that I was trying to understand was why there were two different methods of depreciation charge. Hawawini and Viallet (2011) describe the most common depreciation method as straight-line. This method allows the assets to be “depreciated by equal amount each year” (pg. 36). The other method is accelerated. The accelerated method has the depreciation charge being “higher in the early years of the assets life and lower in the later years” (pg. 36).

While I had to re-read the content and the exhibit in the book to understand these two different methods I could not find an explanation on why there was a need to have multiple methods. After reading the example my conclusion was that it was up to the company to take a bigger hit on the charge at the beginning of the year as opposed to the last year being depreciated. Maybe the company is unsure about the future and would like to take less charge off.

I had difficulty understanding the realization principle. To better understand I had to re-read the section in the book as well as think of a scenario in my head on how that looks.

I was not familiar with the term goodwill in finance. Hawawini and Viallet (2011) define goodwill as “when one firm acquires the assets of another for price higher than the net book value in the acquired firm’s balance sheet” (pg. 37). The example in the book did provide support on how this is considered. I again thought of a scenario on if I bought a logo, an intangible asset, from a company the difference in what I bought it for compared to what it is worth is the goodwill. What is interesting is how do you put a number on an intangible asset? How would you know if the worth is depreciating over time? Who determines that?


This discussion question for this week was interesting. We had to identify what was difficult for us to understand. It was supporting to see that we all have our challenges understanding this chapter. I am on the same page with you regarding the vocabulary and acronyms. These were all new to me and confusing when two words mean the same thing. While reading and re-reading through the areas and putting them into thought on how it looks from my point of view was helpful. I was able to articulate in my mind how to describe and use some of these definitions in my life and line of work. I actually thought at one point that I may need flash cards if we have to memorize these words and definitions. Thanks for sharing that you use a vocabulary sheet, that maybe helpful for me as well.

3. Which three concepts or calculations discussed in Chapter 3 are most important or useful to you? How did you gain an understanding of these materials?

Chapter 3 was definitely more challenging this week. There were a lot more terms, equations and calculations to consider. What I found of importance this week is something that I was able to grasp a little quicker on. The terms cash, cash-equivalent assets, and liquid assets mean the same thing. I gathered that these assets were important part of a business because a business needs to have a back up of money in case money is needed. These assets are being banked away and stored for operating cash. A business maybe getting a delay in invoices paid and need to pay their employees so they would have to resort to accessing their operating cash to get their employees paid. How I come to understand this is a way one would use a savings account. They would keep putting cash in to build up money and have it for that just in case. For example, a

water heater went out and one needed to purchase a new one. That money could be available to make the purchase.

What was also beneficial to learn was the operating cycle. The operating cycle is defined as, “the sequence of operating activities that begins with the acquisition of raw materials and ends with the collection of cash for the sale of final goods” (Hawawini & Viallet, pg. 626). The exhibit in the book was an excellent example of understanding on what happens in each stage as well as identifies the effects on the balance sheets. The first state identified was procurement. I was not familiar with the procurement term so I looked up in the dictionary on what the definition was. Procurement is, “the act or process of procuring” (Merriam-Webster, n.d.), while I didn’t fine that helpful I had to look into what the definition of procuring was. Procuring is, “to get possession of: obtain by particular care and effort” (Merriam-Webster, n.d.). In the operating cycle the procurement would be the obtaining of materials so it can be turned into goods which happen in the production stage. The cycle continues with the sale of the goods and then the cash that is achieved.

When comparing matching financial strategy with the mismatching financial strategy the book uses an example to explain the difference between the two and why one is riskier than the other. The matching strategy suggests that, “long-term investments should be financed with long-term funds and short-term investments should be financed with short-term funds” (Hawawini &Viallet, pg. 73). For example, if an ultrasound machine with a 5 year life span was purchased on a 5 year fixed loan it would be the company’s benefit and less risk involved then compared to a mismatched strategy in which the ultrasound machine was on a one year renewable loan and the possibility of the renewed loan could go up as well as having a higher interest rate. It is the strategy managers must discern on to take the risk with mismatching if they anticipate interest rates to go down.


Merriam-Webster. (n.d.). Merriam-Webster dictionary. http://dx.doi.org/ Retrieved from http://www.merriam-webster.com/dictionary/procuring

As we move along through finance I keep thinking how my involvement in managing my own unit budget relate to these concepts we are reading. I actually think we do have a gap in our organization on the education managers need to know to manage the budget. In our organization there really is not an official finance class for managers to go to. We are held accountable to manage our budget which entails supplies and salaries. We are given minimal guidance to balance a budget and really have no relation to how revenue fits in to our individual unit. Healthcare is quite challenging to financially manage because we have to take into account people lives, to maintain safety, and quality outcomes for them. Our direction in healthcare is that, "your unit needs to work with this many people and thats it", if we go over due to a patient needing life saving measures then we need to make that time up somewhere else. As nursing managers we have a lot of responsibility and accountability with the budget yet so many restrictions, resources, and knowledge about the matter. It is probably a good question to ask leadership about.

4. Which three areas discussed in Chapter 4 are most difficult for you to understand? What have you tried to understand these materials?

In Chapter 4 I identified that I had trouble following an example of cash flows from operations by way of the sale of goods and services. The book describes, “Each time a customers is invoiced, the firm’s accountant records the sale by increasing both the firm’s net sales account and its accounts receivable by the amount of the sale. Cash comes in later when the customer pays. At that time, the accountant records the transaction by increasing the firm’s cash account and decreasing its accounts receivable by the amount paid. Therefore, by following what happens to receivables over a period of time, we can estimate the cash inflow from sales during that period” (Hawawini & Viallet, pg. 113). I had to reread this area a couple of times to understand what was going on with the money coming in. From what I gathered a firm wants to know overall how it is doing in sales. So that invoice that is sent to the buyer is noted. Then the firm also takes into account that the invoice means profit so it records it in the accounts receivable account, which I was thinking like a savings account, but yet that money is officially not available. But when the cash finally gets there it again gets added to the “savings account” but yet it is deducted as it was put under the accounts receivable account. While these seem like to many accounts to work with and keep up on I guess it is pretty structured on what exactly is happening in the whole operating structure. I must say I do not run my checking account like this but a company does have to show what exactly is going on not only to stakeholders but for regulatory authorities and tax purposes. So again after rereading it I understand it to be about tracking like on the balancing sheets. The sales are tracked, accounts receivable (the bill sent out), payment is received, accounts receivable is adjusted, and the cash account is increased because the payment was made.

It took some time to understand the margin component and the investment component. The margin component is defined as, “sales less the sum of COGS, SG&A expenses, and tax expense” (Hawawini & Viallet, pg. 122). As for the investment component it is, “the change in the firm’s working capital requirement” (Hawawini & Viallet, pg. 122). It helped put into perspective the relation of percentages between the two years (2009 & 2010) in margin component and investment component. When the investment component grows faster than its margin component, the firm’s NOCF declines. Having a company where NOCF is declining despite sales being up can be detrimental for the viability for the company. It is important for the firm to look at all aspects of the operating cycle.

In the reading I found that exhibit 4.2 helped show how cash inflow sources were operating activities, investing activities and financing activities and on the outgoing side, the cash outflow source also contained operating activities, investing activities and financing activities. The exhibit offers what activities fall into each one of the categories. It was easier to see on this diagram how each of these activities change by breaking down the firm’s cash flow at each step. I feel the diagrams are easier to follow then the statements or balance sheets at times.


I agree that the direct and indirect methods were a little complex to understand. I saw it as a different way to present the cash flow. The exhibit 4.5 does provide more detail in the activities

that is happening in the firm. The indirect method in exhibit 4.7 gets to the same figures but the calculations and detail are different. In exhibit 4.8 the indirect method is being quoted as, "can hide a multitude of sins" (Hawawini & Viallet, pg. 120). Despite the reading I too am not sure of why one accounts for depreciation expense and the other does not. Maybe accounting for noncash expenses (depreciation and amortization) they are able to hide money and not account for it?


5. Which three areas discussed in Chapter 5 are most familiar (or least challenging) to you? Why?

For chapter 5 this week a few areas were found to be familiar. In the beginning of the chapter there was discussion on the increase or decrease in profit and whether this was an indicator for managerial performance. While the manager does have influence on whether profits increase or decrease it is not the only indicator. The information and the examples in the reading did provide clarity to this but I also have experienced this first hand. Back in December my nursing unit closed for 2 weeks because we did not have the patients or enough patients to operate. When there is very little patient census the unit loses money as the worked hours per patient day is noted as overage of salary. While it made financial sense to close the unit the department still had to pay for benefits and paid time off which reflected also as overage since there was no profit to be made as there was no patients.

Another area that was easily understood was when a firm does not barrow money for financing and money is used from equity capital for investments. Because there is no interest that needs to be paid as there is no loan then the return on equity be the same as the operating profitability.

The third area that was also familiar was that a higher tax rate a firm is paying will result in a lower return on equity. One of the examples the reading described is when companies operate in non U.S. jurisdictions, they relocate to get a more reasonable tax rate hence increasing the return on equity. This reminded me of the time when companies that did film production were going to come to Michigan to make movies. They were influenced to move their company here because they were going to get tax breaks. Michigan offered this as a way to bring in business to create more jobs in the state. Last I heard the tax break could not happen so the film production company did not want to come.


Some of the material has been challenging to follow, sometimes I did struggle with the theory while the calculations were much easily to understand and vice versa. I am glad the readings do offer examples not only written but in the charts, spreadsheets, graphs etc.

6. Which three areas discussed in Chapter 9, Sections 1 - 3 (pages 277 - 294) are most important to you? Why are they important to you?

In chapter 9 I found that it was important to know the definitions behind dealers, brokers, stocks and bonds. I have heard of these terms used especially linked to Wall Street and stock market, but my knowledge about what really happens there and the term definitions were limited. It was helpful to learn that dealers “trade shares that they own” (Hawawini & Viallet, pg. 286) and brokers don’t own the shares but do provide the service of trading for others. Stock is an equity security that “recognizes an ownership position in the firm” (Hawawini & Viallet, pg. 282) and the bond is a debt security in which the “certificate acknowledges a creditor relationship with the firm” (Hawawini & Viallet, pg. 282).


I as well did find the financial system challenging. Just when the diagrams and exhibits were helping as a visual in our textbook the one on the financial system was pretty busy. This time it was better to read and re-read the concept. As I understand it, financial system is a resource for firms that need cash and they can access it by tapping into this surplus of cash from the economy.

7. Which three concepts discussed in Chapter 6 are most unclear to you? Why?What are the differences between a single amount (lump sum) and an annuity? Please explain the differences through examples.

Question 1

One of the concepts that were difficult to understand was the section of project’s cost of capital. In this section pg. 187 it discusses comparing same risk investments. From the example, if I am given $10,000 from inheritance and the parcel I am thinking about buying is going to have a value of $10,500 in a year then why when I sell it for possibly less than $10,500 I would get the difference and if it sells for more than $10,500 I would give up the difference. I am not sure why I am giving up the difference if I sell it for more.

Another unclear topic is the explanations and the diagrams for the present value of an N-period annuity. While I started to understand the first example to get the PV annuity it kept breaking it down by other equations to get the same figure. I find that the smaller the equation gets the more difficult it is to follow. Then the annuity discount factor where “k” is the discount rate, this is very unclear to me on what the relation is to the original example and why it is needed.

The third concept that is unclear is the description of the present value of an infinite annuity or perpetuity. In the reading it says, “If N is infinitely large, the term 1/(1+k)n can be considered as equal to zero and equations A6.12 reduces to the annuity cash flow divided by the discount rate” (Hawawini & Viallet, 2011, pg. 215). I am really unclear on the description of this equation but the example in the book makes sense when annuity cash flow/discount rate equals PV

perpetuity. I am just not sure about the 1/(1+k)n term. I do see that the PV perpetuity and PV annuity uses the same formula, it’s just how you look at it, if the cash flow is limited it is annuity if it is infinite then it is perpetuity.

Question 2

In the glossary in our textbook I found that annuity is described as, “a cash-flow stream that is composed of a sequence of equal and uninterrupted periodic cash flows” (Hawawini & Viallet, 2011, pg. 616). I also found that annuity used in chapter 9 uses the term in a way of repaying equal periodic installments for a loan. A lump sum is, “a single sum of money that serves as complete payment” (“American dictionary”, 2009). For example, when I hit the lotto I may opt to getting my winnings paid out in annuity, it would be paid in equal amounts each year until the funds are exhausted. If I am going to opt for a lump sum of my winnings then I can expect to get the whole amount.

Hawawini, G., & Viallet, C. (2011). Finance for executives: Managing for value creation (4th ed.). Mason, OH: South-Western Cengage Learning

The American Heritage Dictionary of the English Language. (2009). In The American Heritage Dictionary of the English Lanuage (4th ed.). Retrieved from http://www.thefreedictionary.com/lump+sum

Carolyn,You mentioned the statement from the book, "the net present value (NPV) always underestimates the value of an investment project” (Hawawini & Viallet, 2011, p. 212). The way I see this is an investment that looks like it will create money maybe the first year but what does the 2nd, 3rd, or 4th year of the investment look like. Will is lose money? Will more funds or buying of equipment be needed to sustain this investment? Will there be a need for this project in the future? While this is a great investment do we have the money to get it launched even though it will make money for us? I think asking these questions is part of the value of the investment. After reading the example in our textbook on the investment in the desk lamp this is how I interpreted how the value of an investment comes into play.


8. What are the differences between an ordinary annuity and an annuity due? Please explain the differences through examples.

From what I learned in the face to face class discussion yesterday the ordinary annuity is the cash flow that occurs at the end of a period and the annuity due is the cash flow that occurs at the beginning of a period. For example if you were putting in 100 dollars into a mutual fund today that is the annuity due as you put this cash flow at the start of the period. For the ordinary

annuity, if the period ends at one year then whatever that 100 dollars accrued is the ordinary annuity as the cash flow occurred at the end of the period.

The example in class was also eye opening. While we heard the concept and how it works it was quite different to see an example in a real life scenario. Like the retirement example we used. I think this concept and equation can be used for us now to see what we can expect when we retire and if it doesn't look good we may want to plan a little better.

9. Which three concepts discussed in Chapter 6 are most unclear to you? Why?

Which three computations demonstrated in the TVOM Excel file (see Doc Sharing) are most challenging to you? Why?

All these seem to be tricky to me. When we met face to face in class I felt I was starting to have an understanding on how the equations worked and how to plug in the information. Seeing the excel file already set up and set up with examples is a great tool for this class to assist with completing the equations. A few days have lapsed since I went back in and worked with the files and I also did not have a lap top with me in class to practice, with this I think I was at a disadvantage to really grasp how this would help me. Although I have my notes to help me know how to enter and get a FV with and without adding a present value I still had trouble working with excel. I contacted my fellow classmate Amy and she was able to help me walk through it to where I understood how to use the excel program.

10. How much do you need to save each month for your retirement? This calculation is based on your unique (1) amount of money already saved (PV), (2) time horizon – number of years until retirement (N = Years), (3) expected annual investment return (I/Y), and (4) retirement savings goal (FV).

(1) amount of money already saved (PV) = (35,000)(2) time horizon – number of years until retirement (N = Years) = 360 months(3) expected annual investment return (I/Y) =12% yearly or 1% monthly(4) retirement savings goal (FV).= 2,000,000

My monthly payment I would need to put in is $212.24 a month. If I did this correctly it doesn't seem out of reach. $212.24 a month is definitely achievable.

see below.

pv= -35,000fv= 2,000,000nper= 360rate= 1%

pmt= ($212.24)

On our face to face class meeting I had only brought my ipad so I was not able to physically enter the values in excel to practice in class. While I was watching Amy do it and take notes on paper I thought I had understood it. When I was attempting to do my initial post several days after class I could not figure out how to enter the values to come up with the correct answer. I contacted Amy to help me go over the equation and how to enter it in excel. Thank you Amy for walking me through this. We discussed her initial retirement post above. We used the same steps as we did for mine but her answer still has me clueless. She is practically to her goal (FV) but her monthly payment is so high for the 30 year period. I still do not understand this.

11. How would you evaluate capital investment projects with different life span and different sizes of initial investments by using Payback Period (PP), Net Present Value (NPV) methods? Describe one example for each scenario to substantiate your point of view. How would you evaluate capital investment projects with different life span and different sizes of initial investments by using Internal Rate of Return (IRR), and Profitability Index (PI) methods? Describe one example for each scenario to substantiate your point of view.

The payback period is defined as “the time it takes for a firm to recover its initial investment” (Hawawini & Viallet, 2011, pg. 222). The payback period ignores the time value of money. The calculation to determine the payback period is by dividing the amount of the initial investment by the anticipated cash flow expected. The use of the payback period is commonly used with short term profitability investments. The life span of the investment is important as investors will want the shortest pay back period so that they can have a higher return on the investment. The higher the initial investment the likely it will be longer to achieve it back in the payback period. For example, one would not want to fork out 20 million dollars on the initial cash outlay to have it take 30 years in the payback period.

NPV uses discounted cash flows. NPV evaluates cash flows forecasted to be delivered by a project by discounting them back to the present using the span of time of the project. For NPV it doesn’t matter the life span or size of the investment as long as the NPV is >0$ it is worth taking on. One would want to pick the highest NPV if comparing two investments.

Year Cash Flow 8% Present Present Value

0 -$6,000 1.0 -$6,000

1-4 +$1,500 3.31213 +$4,968

5 +$3,000 .68058 +$2,042

Net Present Value (NPV) = $1,010

$1,010 is not the profit made but a measure of net cash return in today’s dollars.

The internal rate of return is “the discount rate that makes the NPV of the project equal to zero” (Hawawini & Viallet, 2011, pg. 230). Understanding the IRR on an one period investment is easier to understand. The example in the book showed that an initial investment of $10,000 will generate a cash flow of $12,000. Here we know that the IRR was 20% as this was the percentage to get the $10,000 to the $12,000. For a longer life span of an investment the IRR is found by trial and error. The purpose is to get the NPV to zero or at least close to zero, when that is done we find the IRR.

Year 0 1 2 3 4 5 6 Total

Income -$1000 $200 $200 $200 $200 $200 $200

5% discount rate

-$1000 $190.48 $181.41 $172.77 $164.54 $156.71 $149.24 $15.14

6% discount rate

-$1000 $188.68 $178.00 $167.92 $158.42 $149.45 $140.99 -$16.54

In this example we have a positive and negative total, somewhere between 5&6% is where the NPV will be zero.

Here the IRR is 5.47 as the NPV is closest to zero at $0.06.

Year 0 1 2 3 4 5 6 Total

Income -$1000 $200 $200 $200 $200 $200 $200

5.47% discount rate

-$1000 $189.63 $179.79 $170.74 $161.63 $153.24 $145.30 $0.06

Profitability index is used to measure investment opportunities. It measures the proportion of money returned to money invested.

Profitability index= all future cash flows/initial investment

If an initial investment is $90,000 and the future cash flow is $99,000 then the profitability index is 1.10.

“According to the profitability index rule a project should be accepted if its PI is greater than one and rejected if it is less than one” (Hawawini & Viallet, 2011, pg. 238).

If one is comparing two different investments over a longer life span and calculating the PI to make a decision, it could lead to selecting the wrong investment. One must also consider the highest return with the NPV also and not just on PI alone.


I also found this week's discussion questions very difficult. I had a hard time comprehending these investment methods, just when I thought I was able to understand some of them while reading about them but trying to articulate it and provide examples really stumped me. I spent many hours this week trying to gain an understanding. I felt the internet did help me somewhat as I read up on different explanations and examples from websites. While I did my best to articulate it, I too am wondering if I am on the right track.

12. What are the three most difficult concepts or calculations in Chapter 8 from your perspective? What learning strategies or methods did you use to overcome the challenge and gain an understanding of the materials?

In the example of sales erosion, it is not only the cause of creating a new lamp which may drive down sales of previous lamps but this could be caused by competitors coming out with a new lamp and the company will lose sales with customers because they are going to the new lamp from the competitor. It was difficult to comprehend the difference in sunk costs and opportunity costs in this case. If sunk costs are “money already spent that cannot be recovered irrespective of future decisions” (Hawawini &Viallet, 2011. Pg. 630) how is it comparable to the example of the other competitor’s product that will drive down our sales. The company is not spending anything, yet a competitor’s new product will drive down the sales. After reviewing the glossary and the example in the text book I am still not sure why this is an example of a sunk cost. I have a better understanding of the opportunity lost after reviewing the examples in the chapter as well as the definition in the glossary. The company is evaluating whether to give up the revenue of the old lamps because they are looking to create a new one. I definitely agree that these are both sales erosion but still not sure on why the sunk cost is seen with the competitor.

I also had to think about the allocated costs. Apparently allocated costs are overhead expenses. While the paragraph in the reading states overhead costs are split over many projects it also said

that the lamp project will not need to pay it until overhead expenses from the lamp project increase. It would seem only realistic to split the overhead equally between all projects that way you can really see the value of each one.


I too was stumped on the opportunity cost and sunk costs with the examples given. I see that the money they put in to research whether they should take on the new lamps are sunk costs because they may never get that money back, for example if they decide the investment in the new lamp is not worth it they spent the money anyway to look into it. It is a sunk cost.

13. Which three areas discussed in Chapter 10 are most difficult for you to understand? What questions do you have?

Alternate Q1: Which three key learning points from Chapter 10 can you apply to your daily professional and/or personal lives? Please explain.

Which three areas discussed in Chapter 11 are most difficult for you to understand? What questions do you have?

Alternate Q2: Which three key learning points from Chapter 11 can you apply to your daily professional and/or personal lives? Please explain.

Chapter 10

When I read about diversification reducing risk I was able to compare that concept on my investment in the 403B. Apparently I have multiple stocks in different investors instead of having it with a single investor. Here I used a diversified approach.

I identified that systematic risk is an event that affects the economy. What came to mind is how we were all impacted when there was the Bp oil spill. Due to this oil lead disaster in the Gulf the economy encountered higher gas prices. This happened in the time when we were having the recession and it was painful for many that depended on transportation to get to work.

I read about the proxy or pure-play firms as being those that undertake a project they already are familiar with. It identified that there is more risk in the project then with the firm. When I read this what came to mind is the company where I order my PICCs from for my IV team dept. They just came out on the market with a new PICC that is supposed to cut thrombotic occlusions by half due to this new material it was made with. Trials have shown a decrease with this new material but it is still an investment that they are banking on to be successful.

Chapter 11

The term bankruptcy is familiar. Not that I have experienced it personally but I have heard many close friends having to declare bankruptcy especially during the recession we have had, many had lost jobs and were unable to pay their bills/creditors and therefore had to file bankruptcy and

many of their assets were taken away. We also hear of companies going bankrupt like with the company Hostess. They were not able to stay viable during the wake of a strike.

Agency problem is familiar. This is one that has a conflict of interest and doesn’t have the best interest in the company and at times reap the rewards for their own. I experienced this with my assistant manager. My assistant had talked about wanting to launch a new procedure and was seeking support from a company to assist her with this. During a supply change of a product at work we were getting support from the company to get us training to use the new product. She was able to network with many of the companies influences and eventually got hired in, I heard they were very interested in what she was looking to launch. I saw this as a conflict of interest as she told me from the beginning this is something that she wished to pursue one day and then it happen right on company time.

When I read about financial slack and seeing that it represents the buildup of cash I related this to when my husband got his bonus. Since this was a lump sum of money we thought we would invest it in two ways. While these were probably not typical investments it sounded good to us at the time. We gave a lump sum of money to sponsor an individual to support his travel and tournament funds for the PBA (professional bowlers association). If he were to be a success we would get our money doubled in return. Unfortunately that did not work out for us or him. Our other investment we are working on is painting a classic car. Bringing the car back to its original color with raise the value by $20,000, so we are told.

I too was thinking about my 403B when we read on the diversification. According to my statement I do have quite a variety of investments with multiple companies and don't have all my eggs in one basket. I too am not sure if it is "diversified" enough but I went with the recommendation when I set up my 403B to do the nestegg 2040. Apparently I am in aggressive stocks but as the years go by my investments will get less riskier.

14. Which three calculations discussed in Chapter 9, Sections 4 and 5 (pages 294 - 314) can be linked to your learning in preceding chapters? How has your prior learning in this course and elsewhere prepared you to learn the materials in these sections?

The preferred stock, common stock and the dividend discount model was something I learned about in the previous readings. I have gotten more out of this course then I had in my previous experiences in my work place or in previous courses from school. I think the weekly class discussions have helped me the most because we were to answer what we found challenging from reading the chapter. It maybe a simple thing to ask but it encourages the learner to pick out challenging areas which many of them are in finance. The face to face time in the course had also helped me. I see now how helpful it is to have class time when the course is in finance. Hearing the professor break it down to understand and give examples and to where we can ask questions right there was helpful. I found myself looking on the internet for more definitions and examples to understand calculations and concepts of finance.

I feel my sense of knowledge is starting to deepen. While I may have been functioning on my own with my limited knowledge and doing ok at it, I find that I am starting to look at things from a bigger perspective. As we work through out LTP paper I am gaining an understanding on how company's are rating in their ratios compared to their competitors. It is pretty neat to get behind the scenes from a financial point of view to evaluate company's more in depth.

15. What are the three most difficult concepts or calculations in Chapter 12 from your perspective? What learning strategies or methods did you use to overcome the challenge and gain an understanding of the materials?

Alternate Q: Which three key learning points (concepts, calculations, applications, etc.) from Chapter 12 are applicable to you? Please explain.

I was starting to understand price to earnings ratio due to the LTP components but in chapter 12 they incorporate price to book ratio and I don’t understand the need for this or what it really is. I have found that investopedia.com has been really helpful in explaining and defining ratios while I have been working on the LTP but when it comes to this book ratio I am stumped including book value of equity.

I also had trouble with the enterprise value. I am quite confused on how to articulate the equation of this. The values used in the example is $1,360 million. I am thinking that this would be billion, I am unsure of this number. I am starting to comprehend the reason for the enterprise value is to compare companies that have different tax rates as we have used P/E ratio in our LTP but we compared similar companies with similar tax rates.

I had to use the thesaurus on the word conglomerate. One of the sections in the chapter talked about conglomerate mergers. I didn’t realize that merging companies not in the same business is unlikely to succeed as there is a lack of lasting value for shareholders. If neither of the two companies relate I cannot believe that they couldn’t be successful. One of the examples in the reading was on vertical mergers and that makes sense. The vertical merger consists of, for example, a car manufacturer and one of its suppliers. The revenue that the supplier was gaining from the car manufacturer is no longer a revenue and would not be beneficial for the shareholders. But if two different companies didn’t depend on one another you would think it could work.

This chapter was a challenging read. I anticipate that we will gain a better understanding in our face to face class time on Monday. I must say that finance is more difficult to comprehend when it is an online class. At least I gained a more understanding of finance as a whole especially with the terms used. I have found that looking up some of the definitions and examples online gave helped deepen my understanding. That investopedia.com is really helpful for this course.

16. In connection with Chapter 13, which three economic, business, and financial risks can you identify based on your professional experiences thus far? How these risks have affected the financial outcomes of the organizations with which you have been associated?

When I read about corporate risk and the example that could be employees leaving a company and realized that I have experienced this first hand. When I first became a manager I had a 90% turnover rate of employees. This was a huge corporate risk that took place. This turnover affected the department budget as I had to rehire and train all new nurses and technicians. The turnover also created a lot of overtime use which also impacted the budget. There is usually a

small amount of risk expected with turnover because it will happen as employees are encouraged to grow and develop but the 90% was too much to recover and I was over budget that whole fiscal year. Retention is so important for managers to manage to help control cost of turnover.

For economic risk I think of the changes in insurance reimbursement. The insurances are dictating what they will pay for based on the diagnosis. The hospitals and physicians had to change practice and culture in what types of services they are ordering as insurance may not approve to pay. We have experienced this at our own hospital and we are not getting the financial reimbursement for things that can be done out patient or not considered part of the DRG the patient is admitted with. We are also finding that if certain tests and documentation are missing related to the diagnosis than reimbursement will not be returned in this case either.

Another economic risk the hospital is undergoing is reimbursement related to satisfaction scores. It is expected that the organization must have desirable patient satisfaction scores which would indicate a desirable hospital setting and that hospital would be rewarded with reimbursement. With these financial risks it puts organizations at risk for sustaining a future in the community. Without the money an organization could not stay viable as well as competitive in the industry.

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