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Description
Flashcards by Eli Castillo, updated more than 1 year ago
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Created by Eli Castillo
about 7 years ago
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| Question | Answer |
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High Yield Bonds
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Investment Grade Bonds-Bonds rated BAA or higher by Moody's (BBB by S &P) High-Yield Bonds- Bonds rated below investment grade (also known as junk bonds) Fallen Angels- Bonds that received investment-grade rating when first issued but later fell to junk status. |
| Business Risk | refers to the variability of a firms cash flow whereas Financial Risk refers to how a firm chooses to distribute that risk between stockholders and bondholders. |
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What is Financial leverage and why do firms use it?
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When firms in the US have debt in their capital structures, they are using financial leverage The effect of debt is to magnify a firms financial performance. |
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Share Issue Privatizations
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A government executing a share issue privatization (SIP) sells all or part of its ownership in a state-owned enterprise to private investors via a public share offering. |
| Leasing | Similar to long term debt, requires the firm to make a series of periodic, tax-deductible payments. Payments may be fixed or variable. Lessor- Owner of the asset Lessee-User of the asset |
| Constant Nominal Payments Policy | Based on the payment of a fixed-dollar divined in each period. Firms often increase the regular dividend once a proven increase in earnings has occurred. Firms almost never cut dividends unless they fare a true crisis. Low Regular and Extra Dividend Pays a low regular dividend, supplemented by an additional cash dividend when warranted by earnings. |
| Sustainable Growth Model | Sustainable Growth Model derives an expression that determines how rapidly a firm can grow while maintaining a balance between its outflows (increase in assets) and inflows (increases in liabilities & equity) of cash |
| Stock splits and stock dividends | are used by companies that want to reduce the per-share price of their stock. |
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Strategic plan
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strategic (long term) financial plans act as a guide for preparing operating (short term) financial plans Multiyear action plan for major investment and competitive initiatives |
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(ADRs) American Depository Receipts
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Dollar denominated Receipts Dollar denominated claims issued by U.S. Banks. Represent ownership of shares of a foreign company's stock held on deposit in the issuing firms home country. |
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