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MBA > Financial Equations and Calculations > Flashcards

Financial Equations and Calculations Flashcards

1
Q

Inventory turnover =

A

inventory turnover = sale or cost of doing goods/inventory

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2
Q

sale or cost of doing goods
——-(divided by)—————
inventory

A

= inventory turnover

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3
Q

days’ sales in inventory =

A

days sales in inventory =
(ending inventory x 365 days)
——–(divided by)—————
sales or cost of goods sold

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4
Q

(ending inventory x 365 days)
——–(divided by)—————–
sales or cost of goods sold

A

= days’ sales in inventory

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5
Q

accounts receivable turnover =

A

credit sales
–divided by–
accounts receivable

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6
Q

credit sales
—divided by—
accounts receivable

A

accounts receivable =

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7
Q

ACP

A

Average Collection Period

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8
Q

average collection period (ACP) =

A

(accounts receivable x 365)
—divided by—-
credit sales

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9
Q

(accounts receivable x 365 days)
—divided by—
credit sales

A

= average collection period (ACP)

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10
Q

accounts payable turnover =

A

cost of goods sold
—divided by—
accounts payable

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11
Q

definition: accounts payable

A

Accounts payable (AP) is a short-term debt and a liability on a balance sheet where a business owes money to its vendors/suppliers that have provided the business with goods or services on credit.

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12
Q

definition: accounts receivable

A

Accounts receivable (AR) are the balance of money due to a firm for goods or services delivered or used but not yet paid for by customers. Accounts receivable are listed on the balance sheet as a current asset. Any amount of money owed by customers for purchases made on credit is AR.

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13
Q

fixed asset turnover =

A

sales
—divided by—
net fixed assets

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14
Q

sales to working capital =

A

sales
—divided by
working capital

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15
Q

sales
—divided by—
net fixed assets

A

fixed asset turnover

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16
Q

sales
—divided by—
working capital

A

sales to working capital

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17
Q

total asset turnover =

A

sales
—divided by—
total assets

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18
Q

sales
—divided by—
total assets

A

total asset turnover

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19
Q

current ratio =

A

current assets
—divided by—
current liabilities

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20
Q

current assets
—divided by—
current liabilities

A

= current ratio

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21
Q

why is finance important?

A

because value is important

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22
Q

examples of value in financing

A

products/services, common stock, value of the firm itself

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23
Q

what should all managers strive to do , in terms of financing within their firm

A

all managers should maximize the intrinsic value of their firm.
finance has an impact on every important decision made by business managers

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24
Q

hx of New Coke

A

Coke II aka “New Coke” was introduced in 1985 to compete w/Pepsi
-Loyal coke believed: product did not need changing & mad the original product went off the shelves
-3 months after introduction: original product “Coke Classic” reintroduced. 7 years later, Coke II d/c.
***this is often used as a business case study for developing/introducing products

25
Q

How do businesses choose their suppliers?

A

quality of product/service, prices changed, customer service offered during/after purchase
***some companies dedicate assets/manpower to specific customers in order to address their needs promptly

26
Q

reason Obama choose to bail out GM

A

many reasons. one was the impact it had on the local community/local businesses who made virtually all of hteir revenue from supplying the local GM plant

27
Q

CEO of Amazon

A

Jeff Bezos

28
Q

Amazon in 2017

A

CEO Jeff Bezos became the richest man in the world the same year +10% of his 6K employees in Ohio were receiving food stamps

29
Q

2018 STOP BEZOS act

A
  • introduced by Bernie Sanders
  • would have required large employers Amazon/Walmart to pay the government for public assistance received by their employees like food stamps/public housing/Medicaid
  • bill had a 0% chance to pass but did begin a national conversation about corporate subsidies paid for with taxpayer funds
  • Walmart claims its strategy is low prices but it is low wages so many Walmart employees are on public assistence
30
Q

Walton family in 2016

A

6 members of the Walton family (Walmart) had a combined wealth of $90B in 2012 which is more than the bottom 30% of earners in the US

31
Q

where do funds in a business come from

A

funds come from different sources and have different costs/risks

32
Q

what is the role of finance within a business

A

determine how much money to raise, spend, & invest

33
Q

what type of discipline is finance

A

finance is a strategic discipline

34
Q

short-sighted view of the role of finance within a firm

A

short-sighted to say it is the responsibility of hte firm to maximize shareholder wealth. b/c short sighted-stock prices can be manipulated and do not add long-term value to a firm

35
Q

intrinsic stock price

A

true value of stock based on all available issue

36
Q

true value of stock based on all available issue

A

intrinsic stock price

37
Q

role of finance within a business

A

**determines how much money to raise, spend, invest
ability to raise money quickly at a reasonable cost directly impacts decisions the firm will make, what markets to endter, who to hire, what products to make and how, determined the costs associated with production process, and the cash flows realized from these products, where to invest leftover cash

38
Q

Right to Work Laws

A

gives the workers a choice of whether or not to join a union
law prohibits contracts that require workers to join a labor union to get/keep a job

39
Q

states without a right to work law

A

requires employees to pay union dues/fees as a term for employment

40
Q

proponents of right to work laws

A

say workers shouldn’t be obligated to join a union,
the law weakens union power and benefits corporations

41
Q

push to bust unions

A

push by state government -with the courts- to bust unions with right to work laws

42
Q

research regarding right to work laws

A

see higher employment, lower wages for workers, higher executive pay, lower unionization rates

43
Q

community offerings to local firms

A
  • ongoing source of labor
  • restaurants for meals/outings
  • local businesses as customers/suppliers
  • retail stores for employee convenience
  • efforts made/money spent on supporting local communities often pays dividends for hte firm in terms of good public relations and support from the local government
44
Q

organization social and green initiatives

A

socially responsible investing

45
Q

green funds

A

mutual funds that limit investment to firms that limit their carbon footprint & contribute to environmental protection, develop alternative energy sources, practice ethical corporate governance

46
Q

what does socially responsible investing tell corporate executives

A

socially responsible investing is a way for the market to tell corporate execs how they choose to operate their business matters to investors

47
Q

shareholders all managers of businesses are obligated to make decisions for the firm

A

all managers of businesses are obligated to make decisions for hte firm that will maximize the intrinsic value of hte firm. taking into account ALL stakeholders, not nust the common ones

48
Q

founding of ENRON

A

energy firm founded in 1985 as a merger between two Texas energy firms

49
Q

ENRON in the 1990s

A

used fradulent accounting practices to transfer liabilities off of its balance sheet to make the firm appear less risky thus keeping its stock prices artifically elevated which made the firm seem far more profitable than it was

50
Q

ENRON in 2001

A

market analysis began to question their bookkeeping of Enron and the common stock prices droped from $90 per share to $1

51
Q

stance on corporations buying back their own stock

A

it is illegal for corporations to buy back their own stock b/c that is a form of stock price manipulation

52
Q

theory of corporate sustainability

A

corporations have an ethical obligation to run their business in a way that is sustainable for all parties involved (e.g., growth, profitability, societal goals like economic/social justice/environmental protection)

53
Q

what is the benefit of a company’s focus on economic, social just, and environmental protection?

A

helps sustain relationships with stakeholders

54
Q

4 concepts of corporate sustainability

A

corporate social responsibility,
ethical obligation to address the needs of society as a whole

55
Q

what is sustainable development

A

meet the needs of the present generation and create conditions so the future generation can as well

56
Q

what is stakeholder theory

A

stronger the firm’s relationships with other external partie, the eaasier it will be to meet the firm’s business objectives while the worse relationships will be harder

57
Q

what is corporate accountability

A

legal/ethical responsibility to providfe an accurate account/justification of hte actions for which the firm is accuntable

58
Q

how easy is it to measure the market price of stock

A

easy. it is published all day long and changes constantly with trades based on new information

59
Q

how can businesses use the fundamental principles of finance

A

firms can use the fundamental principles to increase the present value of a firm’s expected future cash flow

MBA (2 decks)

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