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Flashcards

Finance Test 1

kjpike2 English 56 cards

Cards in this deck (56)

  1. 1Sarbanes-Oxley ActA law passed by congress that requires the CEO and CFO to certify that their firm's financial statements are accurate
  2. 2Proprietorshipan unincorporated business owned by one individual
  3. 3Corporationa legal entity created by a state, separate and distinct from its owners and managers, having unlimited life, easy transferability of ownership, and limited liability
  4. 4S Corporationa special designation that allows small businesses that meet qualifications to be taxed as if they were a proprietorship or a partnership rather than a corporation
  5. 5LLCa popular type of organization that's a hybrid between a partnership and corporation
  6. 6LLPsimilar to LLC but used for professional firms in the fields of accounting, law, and architecture. Provides personal asset protection from business debts and liabilities but is taxed as a partnership
  7. 7Intrinsic ValueAn estimate of a stock's "true" value based on accurate risk and return data. can be estimated but not measured precisely
  8. 8market pricestock value based on perceived but possibly inccorrect info as seen by the marginal investor
  9. 9marginal investoran investor whose views determine the actual stock price
  10. 10shareholder wealth maximizationprimary goal for managers of a publicly owned company is to maximize the long-run value of the firm's common stock
  11. 11Financethe system that includes the circulation of money, granting of credit, making of investments, and provision of banking facilities
  12. 12Futures MarketsThe markets in which participants agree today to buy/sell an asset at some future date
  13. 13Money Marketsthe financial markets in which funds are borrowed or loaned for short periods (less than one year)
  14. 14capital marketsfinancial markets for stocks and intermediate- or long term debt (one year+)
  15. 15primary marketsmarkets in which corporations raise capital by issuing new securities
  16. 16secondary marketsmarkets in which securities and other financial assets are traded among investors after they have been issued by corporations
  17. 17private marketsmarkets in which transactions are worked out directly between 2 parties
  18. 18public marketsmarkets in which standardized contracts are traded on organized exchanges
  19. 19investment bankan organization that underwrites and distributes new investment securities and helps businesses obtain financing
  20. 20commercial bankthe traditional department store of finance serving a variety of savers and borrowers
  21. 21mutual fundsorganizations that pool investor funds to purchase financial instruments and thus reduce risks through diversification
  22. 22closely held corporationa corporation that's owned by a few individuals who are typically associated with the firm's management
  23. 23publicly owned corporationa corporation that's owned by a large number of individuals who aren't actively involved in the firm's management
  24. 24Annual ReportA report issued annually by a corporation to its basic financial statements as well as management's analysis of the firm's past operations and future prospects
  25. 25Stockholders' Equityrepresents the amount that stockholders paid the company when shares were purchased and the amount of earnings the company has retained since its origination
  26. 26working capitalcurrent assets
  27. 27net working capitalcurrent assets minus current liabilities
  28. 28net operating working capital (NOWC)current assets minus non-interest-bearing current liabilities
  29. 29Income Statementa report summarizing a firm's revenues, expenses, and profits during a reporting period, generally a quarter or a year
  30. 30Operating incomeearnings from operations before interest and taxes
  31. 31amortizationa noncash charge similar to depreciation except that it represents a decline in value of intangible assets
  32. 32EBITDAearnings before interest, taxes, depreciation, and amortization
  33. 33Liquidity Ratiosratios that show the relationship of a firm's cash and other current assets to its current liabilities
  34. 34current ratiocalculated by dividing current assets over current liabilities.
    Indicates the extent to which current liabilities are covered by those assets expected to be converted to cash in the near future.
  35. 35fixed assets turnover ratioratio of sales to net fixed assets
  36. 36debt management ratiosset of ratios that measure how effectively a firm manages its debt
  37. 37time interest earned (TIE) ratioratio of earnings before interest and taxes (EBIT) to interest charges; a measure of the firm's ability to meet its annual interest payments
  38. 38profitability ratiosa group of ratios that show the combined effects of liquidity, asset management, and debt on operating results
  39. 39operating marginratio measures operating income, or EBIT per dollar of sales; it's calculated by dividing operating income by sales
  40. 40profit marginmeasures net income per dollar of sales and is calculated by dividing net income by sales
  41. 41return on total assets (RDA)ratio of net income to total assets
  42. 42return on common equity (ROE)ratio of net income to common equity; measures the rate of return on common stockholders' investment
  43. 43market value ratiosratios that relate the firm's stock price to its earnings and book value per share
  44. 44price/earnings (P/E) ratiothe ratio of the price per share to earnings per share; shows the dollar amount investors will pay for $1 of current earnings
  45. 45Market/Book (M/B) ratioratio of a stock's market price to its book value
  46. 46benchmarkingprocess of comparing a particular company with a subset of top competitors in their industry
  47. 47nominal interest ratethe contracted interest rate
  48. 48annual percentage rate (APR)periodic rate times the number of periods per year
  49. 49effective annual rateannual rate of interest actually being earned, as opposed to the quoted rate
  50. 50Net Cash Flow EquationNet Income + Depreciation
  51. 51Calculating Dividends Paid1) Find difference between BRE and ERE
    2) SUBTRACT from NI
  52. 52MVA equationMarket value of equity (#shares * $)
    - Book value of Equity (#shares * $)
  53. 53Net Income EquationProfit Margin * Sales
  54. 54EBI formulaNet Income / (1 - Tax Rate)
  55. 55Solving for EBITEBIT
    - Interest
    = EBI
    - Tax
    = Net Income
  56. 56Interest (calculate for amount)Interest Rate * Total Debt

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Flashcards on Finance Test 1, created by kjpike2 on 23/08/2014.
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kjpike2
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