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Finance > FIN 201 FINAL EXAM > Flashcards

FIN 201 FINAL EXAM Flashcards

1
Q

What are the 3 subspecialties of finance?

A
  1. Corporate finance
  2. Investments
  3. Institutions
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2
Q

What are 9 career options within finance?

A
  1. Commercial finance
  2. Corporate finance
  3. Insurance
  4. Investment banking
  5. Money management
  6. Real estate
  7. Hedge funds
  8. Private equity
  9. Financial planning
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3
Q

What are the 5 ways finance fits into business management? MOOSA

A
  1. Marketing
  2. Operations/ supply chain
  3. Accounting
  4. OB/HR
  5. Strategic management
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4
Q

What is accrual based accounting?

A

Based on matching principles of revenue and expense

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5
Q

Why is historical cost so important?

A

Historical cost, which is normally a lot less than current market value, is the number that is put on the statement. Better for taxes and such.

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6
Q

Balance sheet includes…

A

 LHS
 RHS
 It is a snapshot in time
 A = L + E

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7
Q

Income statement is…

A

 A basic flow- operations, investment, and financial

 Covers a period of time

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8
Q

Net Income =

A

NI = DIV + RE

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9
Q

Statement of Cash Flows

A

 Operations, investing, financing,

 Focus on free cash flow

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10
Q

What are the strategies for earnings management?

A
  1. Watch inventories
  2. Beware of rising receivables
  3. Uncover extraordinary expenses
  4. Investigate asset sales
  5. Find who is skimping on research
  6. Find when revenue is really not
  7. Spot out balance growth
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11
Q

DuPont Formula

A

ROE = (NI/S * S/A) / (1- D/A)

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12
Q

EVA

A

NOPAT – [ WACC * Costly Capital]

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13
Q

FCFF

A

EBIT – Cash tax payment + Depreciation – CAPEX – increase in NWC

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14
Q

NOPAT

A

EBIT – Taxes
or
NI + Interest

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15
Q

Costly Capital

A

AP + LTD + CS + RE

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16
Q

CAPEX

A

Year 0 Net – Year 1 Net + Depreciation

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17
Q

Increase in Net Long-Term Debt

A

(Year 1 CA- Year 0 CA) + Depreciation

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18
Q

FCFE

A

NI + Depreciation – CAPEX – Increase in NWC + Increase in Net Long-term debt

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19
Q

Liquidity Ratios

A 
	CR = CA/CL
	QR = (CA-Inventory)/CL
	ACP = AR/DCS
	AR Turn = CS/AR
	Inventory Turn = COGS/Inventory
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20
Q

Efficiency Ratios

A

 TAT = S/TA
 FAT = S/FA
 OIROI = EBIT/TA

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21
Q

Financing Ratios

A

 DR = D/A
 Debt-to-Equity = D/E
 TIE = EBIT/Interest Expense

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22
Q

Profitability Ratios

A 
ROA = NI/A
ROE = NI/E
     = 	NI/S		* 	S/A 	* 	A/E
     = Net profit margin * Asset Turnover * Leverage Multiplier
GM = GP/S
OM = EBIT/S
NM = NI/S
23
Q

How can you reduce DFN?

A
  1. Reduce growth
  2. Review fixed assets
  3. Review dividends
  4. Price changes (usually results from growth reduction)
24
Q

Calculating DFN

A

 Projected LHS – Projected RHS

25
Q

Payout Ratio

A

Dividends / NI

26
Q

Plowback Ratio

A

 (1 – [DIV/NI])

27
Q

Calculating Retained Earnings

A

 New RE = Old RE + NI – Dividends

 Projected Sales * (NI/S) * (1 – Cash Dividends/ NI)

28
Q

Calculating SGR (Standard Growth Rate)

A

 ROE * (1 – Div/NI)

 NI/E * (1 – Div/NI)

29
Q

IGR (Internal Growth Rate)

A

 ROA * (1 – Div/NI)

 Maximize sales growth with no new external finance

30
Q

Effective Yield (APR, EAR) Formula

A

 (1 + i/m)^m – 1

31
Q

EAR Formula

A

 (1 + [APR/m])^m – 1

32
Q

Current Yield

A

 An approximate for YTM
 = (Annual Coupon / Market Price)
 = Today’s value (PMT amount) / Present Value

33
Q

PV Formula

A

FV / (1 + i)^n

34
Q

FV Formula

A

PV * (1 + i)^n

35
Q

Face/Par/Mature Value

A

ALL MEAN THE SAME

36
Q

Return Formula

A

 Dividend Yield + Capital Gains Yield

37
Q

Single HPR

A

 [Dividend PMT * (P1 – P2)] / P0

38
Q

GGM (Gordon Growth Model)

A

 V0
o D1 / (Kcs – G)
o [D0 * (1 + G)] / (K- G)
o With Growth: [CF0 * (1 + G)] / (Kcs – G)
o Without Growth: [CF0 * (1 + 0)] / (Kcs – 0) = CF0 / Kcs

39
Q

Sharps Ratio (Risk Adjusted Return)

A

 [E(R) – R(E)] / SD

40
Q

D0 vs. D1

A

 D0 = Historical Dividend

 D1 = Next Year’s Dividend

41
Q

FCFF Uses…

A

Uses WACC

42
Q

FCFE Uses..

A

Uses Ke

43
Q

Holding Period Formula

A

 [Capital Gains + Dividend Gains] / Initial cost

 AKA: [(P1 – P0) + DIV] / P0

44
Q

Annualized Return

A

 [(P1 – P0 + CF1) / P0] * [360 / Holding Period]

45
Q

Expected Return

A

 Sum (PtRt)

46
Q

RRR Formula

A

Rf + Risk Premium

47
Q

Measuring Systemic Risk

A

Plot points on a scatter plot and use LINEAR REGRESSION

48
Q

Security Market Line

A

 [(Rm – Rf) * β ]+ Rf

49
Q

Build-Up Method

A

 Bond Yield + Equity Risk Premium + Micro Cap Premium + Start- Up Risk Premium

50
Q

Market Specific Risk

A
  1. Not diversifiable risk
  2. Systematic
  3. Market
  4. beta
51
Q

Firm Specific Risk

A
  1. Diversifiable risk
  2. Unsystematic
  3. Firm Specific
  4. Idiosyncratic
52
Q

Market Risk Premium is

A

(Rm – Rf)

53
Q

Risk Premium is

A

β * (Rm – Rf)

54
Q

Total Risk

A

= standard deviation

= Square root of [sum of (Ri – Rmean) ^2 * Pi]

Finance (3 decks)

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