Overview of corporate finance Flashcards
What is financing broken down into?
Choosing the best sources of financing for investment and capital structure
What is short-term financial planning broken down into?
Ensuring you have enough cash and inventory. Ensuring a level of liquidity
What is short-term financial planning?
The short term financing of the firm, so the ability to repay loans and to meet short-term financial obligations
How can different investment products be financed?
Issuing stock to raise equity borrowing
What are some examples of current assets?
Cash stock inventory
How can nonconcurrent assets be broken down?
Tangible, noncurrent assets, intangible, nonconcurrent assets
What are some examples of tangible, noncurrent assets?
Land building plants
What are some examples of intangible nonconcurrent assets?
Trademark patents copyright
What are current liabilities?
Short term debts, up to one year
what are noncurrent liabilities?
Long-term debts
what is equity?
Capital provided by the shareholders of the firm
What is Net working capital and how is it found?
Net working capital = current assets - current liabilities
Under a balance sheet model, what must always be true?
Total assets = Total liabilities
How do you calculate equity?
Total assets - total liabilities
How do you find net working capital?
Current assets - current liabilities
What is debt financing?
Borrowing money and paying back with interest for example corporate bonds and loans
What is equity financing?
Raising money by selling equity (shares)
Who are the providers of equity?
Equity holders, stockholders, share holders
How can you find the value of a firm?
Firm value = Value of bonds + Value of shares
What is the main benefit of equity financing?
You don’t have to pay interest
What is the role of a financial manager?
- responsible for an investment decisions
- responsible for financing decisions
- responsible for short-term financial planning
- oversee, accounting, and audit function in the firm
- ensure the financial welfare of the firm (not discussed in this course)
What is the book value?
The accounting value of a firm’s assets
What is the market value?
The price at which willing buyers and sellers would trade assets
What is the goal of financial management?
Maximise the value of owner’s equity
What is the average tax rate?
The tax bill divided by taxable income, ie. the percentage of income that goes to pay taxes
What is the marginal tax rate?
The tax you would pay in % if you earned one more dollar
