Financing Flashcards
1
Q
What is leverage?
A
Liabilites/Shareholders Equity
2
Q
What are the two types of liability accounts?
A
Current liabilities (A/P) will pay back in 1 year or less, mostly relate to operating activities and non current liabilities (LT Notes Payable) and mostly relate to financing activities
3
Q
What is the term for repurchasing common shares?
A
Treasury Shares (contra account)
4
Q
What is the impact on ROA from repurchasing of shares?
A
Assets go down, ROA goes up
5
Q
What is the impact of leverage from repurchasing of shares?
A
OE goes down, Leverage increases
6
Q
What is NOPAT?
A
Net Operating Profit after Taxes
7
Q
How do you calculate NOPAT?
A
Net Income + Interest Expense X (1-t%)
8
Q
How do you calculate tax rate?
A
Tax Expense/Earnings before Tax
