Financial Management Flashcards

1
Q

measures the ability to meet short term obligations

A

Current ratio

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2
Q

Measures immediate liquidity

A

Quick ratio

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3
Q

Measures the average number of days it takes to collect cash from credit sales

A

Average collection period

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4
Q

Measures the average number of days the company holds its inventory before selling it.

A

Days sale period or days inventory held

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5
Q

Measures the average number of days it takes a company to pay its suppliers

A

Days payable outstanding

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6
Q

Metric that shows the amount of time it takes a company to convert its investment in inventory and other resource inputs into cash

A

Cash conversion cycle

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7
Q

Measures the ability of the firm to pay its short term obligations

A

Liquidity ratios

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8
Q

Measures the firms ability to use its assets and manage its liabilities effectively. Measures the speed at which accounts are converted into cash or revenue

A

Efficiency ratios /activity ratios

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9
Q

Measures the ability of the business to generate profits

A

Profitability ratios

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10
Q

Measures the degree to which assets are finance by debt or suppliers credit; measures the effectiveness of the company’s financing decisions and risk taking

A

Leverage ratios

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11
Q

Used by investors to determine whether or not to purchase stock in the company

A

Market ratios

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12
Q

Measures how many times the firms accounts receivable had been turned into cash during the year

A

Accounts receivable turn over

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13
Q

Measures how many times a firms inventory has been sold during the year

A

Inventory turnover

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14
Q

Measures how many times payables are paid during the year

A

Accounts payable turnover

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15
Q

Measures the effectiveness of management in generating revenues from investments in plant, property and equipment

A

Fixed asset turnover

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16
Q

Measures management’s effectiveness in generating sales from all of the firms assets

A

Total assets turnover

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17
Q

Shows the percentage of sales revenue after it covers all direct costs

A

Gross profit margin

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18
Q

Performance ratio that reflects the percentage of profit from operations, prior to subtracting interest charges and taxes

A

Operating profit margin

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19
Q

Measures how much profit is generated as a percentage of revenue

A

Net profit margin

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20
Q

Shows the percentage of how profitable company’s assets are in generating revenue

A

Return on assets

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21
Q

A performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments

A

Return on investment

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22
Q

Measures the proportion of all assets that are financed with debt

A

Debt ratio

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23
Q

Indicates the relative proportion if shareholders equity and the funds supplied by creditors

A

Debt to equity ratio

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24
Q

Measures the amount of net income that is available for payment to the holders of its common stock

A

Earnings per share

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25
The ratio of the company's share price to the company's earnings per share
Price-earnings ratio
26
Shows how much a company pays out in dividends each year relative its stock price
Dividend yield
27
Is the ratio of equity available to common shareholders dividend by the number of shares outstanding
Book value per share
28
The ratio of the total amount of dividends paid out to shareholders relative to the net income
Dividend payout ratio
29
Measures the average number of days that a patient stays in the hospital
Average length of stay
30
A measure of utilisation of the available bed capacity. Measures the percentage of beds occupied by patients for a given period of time (usually per year)
Bed occupancy rate
31
It is the number of times there is change in the occupant for a bed during a given time period
Bed turn over rate
32
Are written records that convey the business activities and the financial performance of a company
Financial statements
33
The three main financial statement reports are
Balance sheet Income statement Statement of cash flows
34
Shows the firms assets, liabilities and equity
Balance sheet
35
Are economic resources that are owned by Organizational and are expected to benefit future operations
Assets
36
Refers to cash and other assets that will be converted to cash or consumed once year from date of balance sheet
Current assets
37
Refers to assets that have anticipated useful life that is considerably longer that 1 year
Non-current assets
38
Are amounts due from customers for goods or services performed in normal course of business
Accounts receivable
39
Assets held for sale in ordinary course to business
Inventory
40
Tangible assets that are held for use by the firm for more that one period
Fixed assets
41
Examples of fixed assets are ?
Land Building Equipments vehicles Furniture
42
Economic obligations that are owed by the firm and are expected to be paid in the future
Liabilities
43
Obligations that are due to be settled within months from balance sheet date
Current liabilities
44
Long term financial obligations that are after a year or more
Non current liabilities
45
Are amounts due to vendors or supplies for goods and services received that have not been paid for
Accounts payable
46
Principal on a bank loan that si due within the year
Current portion of long term debt
47
Income tax due to the government
Income tax payable
48
Unpaid expenses like payroll, utilities, government contributions, interest on bank loan, taxes and permits, etc
Accrued expenses
49
Debt that matures in more than one year. Can be secured or unsecured and generally have maturities of more that 5 years
Long term debt/ term loans
50
Generally issued to the general public and payable over the course of several years
Bonds
51
Debt instruments issues to individual investors. Payment terms may vary from note to note
Individual notes payable
52
Are bonds with feature that allows to redeem them for shares of common stock
Convertible bonds
53
Leases that extend beyond 12 months period
Lease obligations or contracts
54
Capital contributed by the owner
Equity or capital
55
Accumulated earnings or surplus, net of dividends paid to shareholders
Retained earnings
56
Summarises revenues, expenses and resulting net income for net loss for a given period
Income statement
57
The price of goods sold or services rendered
Revenue
58
Any cost of doing business resulting from revenue generating activities during a given period
Cost and expenses
59
Direct cost incurred in producing a product or delivering service
Cost of sales or cost of service
60
Expenses that the business incurs through its normal operations
Operating expenses (OPEX)
61
Excess of revenue over cost
Net income
62
Summarises the sources and uses of finds for a given period
Statement of cash flow
63
Cash inflow clues
Proceeds, receipts from customers, collection of
64
Clues for cash outflow
Payment, purchase of , building construction or renovation, cash paid , repurchase of, repayment of , dividends paid to shareholders
65
Refers to the efficient and effective management of finds in such a manner as to accomplish the objectives of the organisation
Financial management
66
Financial management concept that states that a peso today is worth more that a peso you will receive in the future
Time value of money
67
Five components of time value
Present value Fitire value Rate Time period Payments
68
Possibility that the investment will lose money
Risk
69
The profit expressed as a percentage of the initial investment
Return
70
Is an investment principle that indicates the higher the risk, the higher the potential reward
Risk-return tradeoff
71
Is any technique involving use of debt rather that fresh equity in purchase of an asset, with the expectation that the after tax profit to the shareholders from the transactions will exceed the cost of borrowed capital
Leverage
72
Refers to the sustained increase in price of goods and services which can ve translated as the decline in purchasing power over time
Inflation
73
The potential benefits an individual, investor or business missed out when choosing one alternative over the other
Opportunity cost
74
Perfers to profits earned by the company during a period of time which calculated as difference between revenue and expense
Profitability
75
The ability of an equity to pay its liabilities in a timely manner, as they fall due under the original payment terms
Liquidity
76
Involves significant commitment of funds to generate future returns or benefits
Capital investment
77
Refers to the mix of long term sources of fund used by firm. It usually is composed of long term debt, preferred stock and common stockholders equity
Capital structure
78
Refers to the best mix of debt, and equity financing to be used for operations and expansion
Optimal capital structure
79
Money invested by the shareholders
Equity capital
80
2 sources of equity capital
Money invested in business Retained earnings or accumulated profits less dividends paid
81
Referrs to borrowed capital/money
Debt capital
82
It is the minimum rate of return or rate of earnings that the firm requires as a condition for undertaking an investment
Cost of capital/weighted cost of capital/ interest rate /hurdle rate
83
Calculation of the firms cost of capital in which each category of capital if proportionately weighed
Weighted average cost of capital (WACC)
84
The process by which management identifies, evaluates and make decisions on capital investment
Capital budgeting
85
It is the value future cash flows (inflow and outflows) over entire life of the investment discounted to the present
Net present value (positive NPV should be accepted)
86
Indicates whether an investment will create or destroy the company value
Profitability index or profitability investment ratio (>1 is acceptable )
87
Estimates the profitability of potential investments. It is a discount rate that makes NPV of all cash flows from a particular project equal to zero
Internal rate of return ( if IRR is < WACC, then accept the project )
88
Gives the number of years to recoup the funds invested in a project
Discounted payback period (shortest payback period is considered most profitable)