B2 Stuff Flashcards
What is the Weghted Average Cost of Capital by Definition
its the avg. cost of both debt and equity financing related to assets and shit that already exists
After tax cost of debt formula?
Pretax Cost of debt x (1-TAX RATE)
Cost of preferred Stock Formula
Dividend from PS / Net Proceeds from PS
LEMME KNOW THE RETAINED EARNINGS USING CAPM METHOD GIMME THAT EQUATION
Risk Free Rate + (Beta* (Market Rate - Risk Free Rate)
WHAT THAT COST OF RETAINED EARNINGS USING SOME DISCOUNTED CASH FLOW METHOD
(Dividend at end of year one / Current market value of O/S stock) + growth
Whats the cost of RE under that bond yield plus risk premium equation
Pretax cost of Debt + Mrkt Risk Premium
WACC Formula?
Cost times weight of LTD, CS, and PS.
Lemme know that difference between operating leases and finance leases talking bout the recording and shit
Operating- ROUA & Lease Liability Recorded for the Lesssee. Amortize the shit out of the ROUA and a lease expense hits the I/S
Finance Lease: lessee records ROUA & Lease Liability. Then these fuckers make payments of interest and principle. This means theres now a Interest Expense on the I/S and the lease liability is paid down.
The fuck is the difference between a debenture and a subordinate debenture?
Debenture is unsecured obligation issued by someone….Subordinate is a bond issue that just ranks a tad higher in terms of liquidations
Why are debt covenants used
basically company A lends to company B but established this covenant to company B saying they cant lend to others or do some certain financing activities because their management are fucking idiots who need to be restricted.
Operating Leverage?
company uses fixed costs (salaray, depreciaion, etc…) instead of variable ones
Financial Leverage?
Means the company uses debt to finance shit….this leverage is basically how it impacts the % change in EBIT and EPS.
Working Capital Equation
Current Assets - Current Liabilities
Lemme see that Cash Conversion Cycle Formula
Days in Inventory + Days Sales in AR - Days Payables Outstanding
Inventory turnover and Days in Inventory Equations?
Inv. Turn. = COGS / Avg. Inv
Days in Inv. = End Inv. / (COGS / 365)
AR Turnover?
Days Sales in AR?
AR Turnover = Net Sales / Avg. AR
Days sales in AR = Ending AR / (Net Sales / 365)
AP Turnover
&
Days of Payables Outstanding Equation
AP TURNOVER: COGS / Avg. AP
DAYS of payables O/S= End AP / (COGS / 365)
How can a pimp defer some damn payments?
Defer payments, drafts, lines of credit, zero balance accts.
APR for Quick payment discounts equation
(360/ (pay period - discount period)) x (Dicount % / (100% - Disc. %))
Reorder Point equation
Safety Stock + (Lead Time * Sales)
EOQ Formula
Two SOC SQRT of (2SO / C)
Sales in Units
Order Cost (per P.O)
Carrying Cost per unit
What the fuck is factoring? How does it speed up cash?
Company sells off an Accounts receivable to a third-party (a factor) for cash now usually a % of the receivable and will be charged interest. The factor then becomes responsible for collections.
Three dank motives for holding cash
Transaction Motives: have enough cash for regular transcations
Speculative Motive: Have enough cash to take advantage of possible oppurtunities
Precautionary MotivesL have enough doe as a cushion in case some bullshit happens
How can you speed up collections
screen customers, bill on time, give discounts (expensive), factor the AR
Pros and Cons of short term financing
Pro: Liquidity, prfitability, lessens financing costs
Cons: More Interest rate risk, less available capital
Pros and Cons of long term financing
Pro: Less Interest Rate Risk, More availbale capital
Cons: Less Liquid & Profitable, More financing costs
difference between line and letter of credit
Line of credit is a loan with a bank that is defined and can be renewed before expiring
Letter of credit like a garuntee (usually made by a bank) that someone can pay off a debt, and is essentially a credit enhancement. Like I would not extend a letter of credit for craig.
Present Value Equation
FV / (1+r) ^n
Present Value of an Annuity Equation
PMT x [1 - (1/(1+r)^n)] / r
The fuck is the gordon growth dividend discount model and what the fuck is the equation
Stocks will pay dividends in the future and grow at a constant rate.
Price @ t = Dividend @ t+1 / (Required return - growth rate)
What are price multiples and what are 4 price multiple ratios?
They are used in stock valuations by using a ratio of market price to another value. it gves the intrinsic (true) value of stocks and leads to if the stock is over/under valued:
P/E Ratio
Cash to sales ratio
Price to cash flow ratio
Price to book ratio
The frick is discounted cash flow analysis and some methods of it
tries to find the intrinsic value of a sock through the PV of future was flows. The Disc. Cash Flow stock price is found and then compared to market price to tell how its valued. Methods:
Dividend Discount Model
Free cash flow to firm
Free cash flow to equity
Residual income
DUDE WHAT is even an option?
pretty much a contract that allows the holder to buy (call option) or sell (put option) a stock/other asset
4 methods of valuation for tangible
Cost: OG cost paid
Market Value: replacement cost or NRV
Appraisal: appraise that bitch
Liquidation: what you could get for it if you sold today
3 methods of vlauation for intangible
MArket: arms-length sale in market of related good
Income: Discount Future cash flows to present value
Cost: based on replacment cost
After tax flow equation
Pretax cash flow x (1-Tax rate)
wtf how do you find a depreciable tax shield aka tax savings
Tax Rate x Depreciation Deduction
three general stages of a capital investment
Inception of project (largest $$)
operating
Disposal
What is NPV, how do you tell if its good
difference of PV between inflows and outflows of a project… + NPV is good….-NPV is bad
When should a project be taken on in terms of the IRR
If IRR is greater than Hurdle Rate
Payback Method Formula
Net intital Investment / Increase in Annual Net After Tax Cash Flow
P/E ratio is:
Current Stock Price / Expected EPS
PEG Ratio:
Price Earnings Ratio / (Growth Ratex100)
Price to Sales:
Current Stock Price / Expected Sales Per share
Price to cash flow:
Current Stock Price / Expected Cash Flow per Share
Price to Book Value:
Current Stock Price / Book Value Per Share
