Flashcards

Quiz Two Financial Management

Eli Castillo English 10 cards

Cards in this deck (10)

1High Yield BondsInvestment 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.
2Business Riskrefers 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.
3What is Financial leverage and why do firms use it?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.
4Share Issue PrivatizationsA 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.
5LeasingSimilar 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
6Constant Nominal Payments PolicyBased 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.
7Sustainable Growth ModelSustainable 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
8Stock splits and stock dividendsare used by companies that want to reduce the per-share price of their stock.
9Strategic planstrategic (long term) financial plans act as a guide for preparing operating (short term) financial plans
Multiyear action plan for major investment and competitive initiatives
10(ADRs) American Depository ReceiptsDollar 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.