FINMAN Flashcards
An important tool used in time value analysis; it is a graphical representation used to show the timing of cash flows.
Time Line
The amount to which a cash flow or series of cash flows will grow
over a given period of time when compounded at a given interest rate.
Future Value (FV)
______can be defined as the science and art of managing money
Finance
A ________ is an organizational entity involved in the provision of goods and services to customers mostly to gain profit.
business
set of detailed accounting guidelines and standards.
(GAAP): a
(GAAP): stands for
Generally Accepted Accounting Principles
_____: a fundamental concept in finance that states money available today is worth more than the same amount in the future.
Time Value
_______: The current value of future cash flows discounted at the appropriate discount rate.
Present Value
Present Value: formula
PV = FV/(1+r)^n
______: The value of investment at a specific point in the future after earning interest or returns.
Future Value
Calculated by compounding present cash flows over time.
Future Value
Formula of future value
FV = PV x (1+r)^n
What is the future value of 10,000, 20 years from now given annual interest rate of 6%.
FV = 32,071.35
What is the present value of 10,000, 10 years from now given the same annual interest rate of 6%.
PV = 5,583.95
________: Involves determining the rate of return that equates a present value to its future value.
Finding Interest Rate
Often solve using financial calculators or algebraic methods
Finding Interest Rate
The 3 general types of annuities
- ordinary annuity
- annuity due
- perpetuity
__________ pays a fixed amount at the end of each period, an
ordinary annuity
______ pays forever.
perpetuity
______ pays a fixed amount at the beginning of each period,
annuity due
______: This is mainly concerned with using efficiently the important economic resources of a firm like its capital funds.
Financial Management
______ own shares in any company.
Shareholders
_______specifically own stock in a corporation
stockholders
_____: the language of finance
Accounting
_____: modern approaches to financial management that applies a large number of mathematical and statistical tools and techniques.
Econometrics
_____: The amount of cash and cash-equivalents being transferred into and out of a business.
Cash flow
_____: Holders of shares receive dividends from a corporation as returns of their investments
Dividends
_______: A financial product that involves series of equal payments made a regular intervals over a specified period of time (Semi-annually, Quarterly or monthly).
Ordinary Annuity
_______: A type of annuity that pays an infinite series of cash flows.
PERPETUITIES