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FA 101 EXTREME > Game Time > Flashcards

Game Time Flashcards

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1
Q

DDM

A

Use when you have prior history of dividends paid by company and company profitability
Company has stated clear dividend policy
Present value of expected future dividends

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2
Q

DCF

A

When an investor is valuing the firm from perspective of a potential / actual controlling shareholder
Free cash flow are expected to align with profits within reasonable period

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3
Q

FCFF

A

Cash available for distribution to debt&equity holders

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4
Q

FCFE

A

Method preferred when dividend policy of the firm is not stable or when investor owns a controlling interest in the firm
Cash is only available to equity holders

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5
Q

Equity value

A

Dividend per share /cost of equity

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6
Q

Gordon growth model

A

DIV / (r-g)
R = Discount rate
Div = dividend
G = current price of share

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7
Q

H model

A

Growth approaches terminal growth phase

Attempts to smooth out the growth rate over time

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8
Q

Three stage model

A

High growth
Transition phase
Terminal growth phase
- Initial growth then period of extreme increase / decrease then eventually stabilise at moderate rate for life of company

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9
Q

After tax net interest

A

Debt (yr before) * after tax net interest /debt ratio (current year)

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10
Q

Residual income

A

Income that is left after all personal debts and expenses are paid

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11
Q

Defined benefit scheme

A

Employees guarantee a specific retirement benefit amount for each participant based on factors such as employee salary and years of service

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12
Q

DB risks

A 
Employee:
DB plan is underfunded 
Employer: 
Return on plan assets will fall short 
The person wil continue work 
Annuity rate falls
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13
Q

DEfined contribution scheme

A

Primarily funded by employee - set aside part of salary - employer may match the amount

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14
Q

DC RISKS

A

risk of inflation

Risk of poor investment funds

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15
Q

ESG - G

A

GOVERNANCE
Bribery
Decisions made by top people

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16
Q

Impact driven investors

A

What is the impact of a company’s activities in the envir and society

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17
Q

Return driven investors

A

What is the potential impact of ESG issues in company enterprise value

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18
Q

MSCI

A 
AAA = best 
CCV = worst
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19
Q

Green washing

A

Conveying a false impression/ providing misleading info about how a company products are more environmentally sound

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20
Q

Potential red flags

A

Unexplained changes in accounting policy
Unexplained transactions that boost profits
Unusual increase in trade receivables w/o change in sales - money laundering
Unusual increase in inventory in relation to sales
Increasing gap between reported profit and cash flow operations ^^^
Unexpected large write offs and impairments

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21
Q

ROE

A

Return on equity

Net income / common equity

22
Q

Days receivables

A

Trade receivables / average revenue per day (revenue / 365)

23
Q

Days inventories

A

Inventory/average COS per day

24
Q

Current ratio

A

Current assets / current liabilities

25
Q

Quick ratio

A

(Cash + trade Receivables) / current liabilities

26
Q

Debt - to - equity ratio

A

(Current debt + non-current debt) / shareholders equity

27
Q

Sustainable growth rate

A

B * ROE
B = earnings rentenion rate

Retention rate = 1-dividend payout ratio

28
Q

Market risk premium

A

Around 5-7%

29
Q

Cost of debt - tax rate

A

Use net tax rate

30
Q

Firm value

A

Incl debt

31
Q

Equity value

A

Exclude debt

32
Q

Earnings retention ratio

A

1- dividend payout ratio

33
Q

Financial analysts

A

Sell-side analysts: employed by providers of research and brokerage service
Buy-side: internally employed by assets managers

34
Q

Conservatism bias

A

Where people emphasis original, pre-existing info over new data

35
Q

Anchoring bias

A

Causes us to rely too heavily on the first price of info we are given about a topic

36
Q

Confirmation bias

A

When people ignore new info that contradicts existing beliefs

37
Q

Hindsight bias

A

being over confident about the future could affect how much you put effort you put in now
- studying - think know what’s in an exam so put less effort into it

38
Q

Mental accounting bias

A

Metally sorting our funds into separate accounts - making it easier to over spend

39
Q

Framing effect

A

When people make judgements in the way the info is presented, as opposed to just the facts

40
Q

Availability bias

A

Assessing the prob of an event occurring based on previous similar situations that have happened

41
Q

Emotional bias

A

Based on the personal feelings of an individual at the time a decision is made
Also may be deeply rooted in personal experiences that influence decision making

42
Q

Self - attribution bias

A

Tendency to attribute successes to personal skills and failure to beyond thier control

  • good grade = study hard
  • bad grade = teacher hates me
43
Q

Overconfidence bias

A

Overestimating themselves / ability

44
Q

Status quo bias

A

People preferring that things stay the same

45
Q

Regret aversion bias

A

The fear of making a decision because it could be wrong

46
Q

Gambler fallacy

A

Flipping a coin, landing on heads 4 times then you will think surely next time it will land on tails
= different to previous outcomes

47
Q

Hot-hand fallacy

A

Future outcomes will be like previous outcomes

If you roll a die a certain way, same way rolling will produce same outcome

48
Q

ESG

A

Enviro, social & governance

Measure sustainability of a company

49
Q

Sri

A

Socially responsible investing
Keeps in mind the enviro and social effects of investments - making possy impacts
Invest as personal you think good investment

50
Q

ESG v SRI

A

Basically ESG focus on environmental

Sri focus on personal beliefs

51
Q

Csr

A

Corporate social responsibility

Is the concept that a business has the responsibility to do good

52
Q

NAV

A

Total assets - total liabilities

/ total shares

FA 101 EXTREME (1 decks)

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