Exam 1 Review and Equations Flashcards
What are the three sub?specialties of finance?
corporate finance?maximize shareholder wealth
investments?money managers
institutions? banks, insurance and pension
What are the 9 careers in finance?
Commercial bank Corporate finance financial planning insurance investment banking money management real estate hedge funds private equity
What are the four careers in investment banking?
private wealth management
security offerings
mergers and acquisitions
research analyst
T/F do businesses use accrual based accounting?
FALSE
What is revenue recognition?
You can either put your revenue on the books as a % of completion of a project OR
save revenue when completed
3 parts of Statement of Cash Flows
Operations
Investing
Financing
3 types of benchmarks
Time series/trend analysis
cross?sectional (compare yourself to peers)
Goal setting
4 types of ratios
Liquidity
Efficiency
Financing
Profitability
Which of the following streams of income is not affected by how a firm is financed (whether with debt or equity)?
Operating income ? financing is assumed not to impact revenue or cost of goods sold and operating expenses. However, it will impact interest expense and taxes. Working capital is defined as CA?CL and is not a stream of income
Who owns the retained earnings of a public firm?
All equity accounts are owned by the shareholders ? they are the owners of the firm.
What is a non?cash expense?
depreciation
corporate finance’s synonyms
managerial finance
financial management
business finance
NOT INVESTMENTS
What is a passive investing technique?
Dollar?cost?averaging
asset (money) manager for a hedge fund. Which certification will add the most value for you according to the text?
Chartered Financial Analyst (CFA)
Supply chains are also known as?
value chains
marketable securities are also known as?
cash equivalents
An increase in an operating asset account indicates a _____ of cash.
use
Financial leverage refers to the
amount of debt used in a firm?s capital structure
________refers to the net expenditures by the firm on fixed asset purchases.
Capital spending
refers to the net total cash flow of the firm available for distribution to its creditors and stockholders
Free cash flow to the firm
What is the intuition behind an optimal debt ratio?
it will minimize the cost of financing
Economic Value Added (EVA) measures economic profit instead of accounting profit by accounting for what?
Opportunity Costs
The financial ratio measured as net income divided by total assets is known as the firm?s:
return on assets
Liquidity
CR
CA/CL
Liquidity
QR
(CA-INV)/CL
Liquidity
ACP(AVCOLLPER)
AR/DAILYCREDSALES
Liquidity
AR TURN
CREDSALES/AR
Liquidity
INV TURN
COGS/INV
Efficiency
TAT
S/TA
Efficiency
FAT
S/FA
Efficiency (ALSO PROF)
OIROI
OPERATING INCOME RETURN ON INVESTMENT
EBIT/TOTASSETS
Financing
DR
D/A
Financing
DEBT-TO-EQUITY
D/E
Financing
TimesIntEarned
EBIT/INT EXP
Profitability
ROA
NI/A
Profitability
ROE
NI/E
Profitability
GM
GP/S
Profitability
OM
EBIT/S
Profitability
NM
NI/S
Profitability
DuPont
NI/SS/AA/E –> NI/E
Profitability
FCFF
EBIT - CASH TAXES + DEP - INC (CA-CL) - INCPPE
ProfitabilityFCFE
NI+DEP-INC(CA-CL)- CAPEX+NEWNETLTD
EVA
NOPAT - (WACC * COSTLYCAP[NP,LTD,EQUITY])
