Chapter 13 (Equities) Flashcards

1
Q

Book Value

A

The net worth of common equity according to a firm’s balance sheet.

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2
Q

Constant-Growth DDM

A

A form of the dividend discount model that assumes dividends will grow at a constant rate.

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3
Q

Dividend Discount Model (DDM)

A

A formula for the intrinsic value of a firm equal to the present value of all expected future dividends.

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4
Q

Dividend Payout Ratio

A

Percentage of earnings paid out as dividends.

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5
Q

Earnings Management

A

The practice of using flexibility in accounting rules to manipulate the apparent profitability of the firm

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6
Q

Earnings Retention Ratio

A

The proportion of the firm’s earnings that is reinvested in the business (and not paid out as dividends).

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7
Q

Intrinsic Value

A

The present value of a firm’s expected future net cash flows discounted by the required rate of return.

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8
Q

Liquidation Value

A

Net amount that can be realized by selling the assets of a firm and paying off the debt.

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9
Q

Market Capitalization Rate

A

The market-consensus estimate of the appropriate discount rate for a firm’s cash flows

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10
Q

PEG Ratio

A

Ratio of P/E multiple to earnings growth rate.

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11
Q

Plowback Ratio

A

The proportion of the firm’s earnings that is reinvested in the business (and not paid out as dividends).

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12
Q

Present Value of Growth Opportunities (PVGO)

A

Net present value of a firm’s future investments.

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13
Q

Price-Earnings Multiple

A

The ratio of a stock’s price to its earnings per share.

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14
Q

Replacement Cost

A

Cost to replace a firm’s assets.

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15
Q

Tobin’s q

A

Ratio of market value of the firm to replacement cost.

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16
Q

Two Stage DDM

A

Dividend discount model in which dividend growth is assumed to level off only at some future date.