Overview of Finance Flashcards
Treasury Securities
Example is BOND issued by Fed Govt. to raise money
Bond
also a Debt, similar to loans used by city governent to build schools, roads
Preferred Stock
Also called Hybrid, paid first during bankruptcy, pays dividends in arrears
Primary Stock
First Market to raise capital. Wells Fargo, Bank of America
IPO
Initial Public Offering- first time stocks and bons are sold to raise money in Primary Market
S-1
PROSPECTUS/ contains business info address, board of directors FINANCIAL OVERVIEW OF COMPANY REQUIRED FOR IPO
Secondary Market
After the 1st marlet example: :NYSE buy and sell stocks and bonds after IPO NYSE is the largest market
Dealer Martket
No physical location, National Association of Securities Dealers Automated Quotations (NASDAQ) is an example
Auction Market
NYSE is an example buy and sell stocks and bonds
Risk
Potential loss or gain of a transaction UNKNOWN FACTOR
Income Statements
Measured over a period Jan-Dec
Revenue-Expenses
Balance Sheet
Assets=Liabilities+Equity
Own=Owe+Stock buy in my company- Measured at a point in a period
Statement of cash flows
flow = direction of cash
cash in coming in or leaving
Accounting
business function responsible for creating and recording of financial information
Net Income
Company FINAL INCOME. after deducting tax
EBIT
Earnings before interest and tax
OPERATING INCOME
Operating Income
Sales - Operating Expense
Operating Expense
Rent Salaries, Depreciation
Interest Ezpense
Interest the BANK charges on the money you owe DEBT
CAPEX
CAP is for Capital
EX is for expenditures money spend on long term assets such as Machines, plant, property, PPE
NWC
net working capital Current assets-current Liabilities looking at the funds at hand to keep the business running
FCF
Free Cash Flow leftover cash after bills and taxes are paid
Ratio Analysis
compare financial relationship sales=4 expense=2 ratio is 4/2=2 SALES ARE twice my expense
annuity
recurring payment same payment same collection each time of the year/month
Ordinary annuity
paid at the END Credit card end of 30 days
annuity due
due at the beginning APARTMENT
APY and effective yield
annnual interest rate including compounding APR is used to calculate APY
Par Value
Face Value $1000
YTM
yield to maturity current yield, amount made from the purchase date of the bond to its maturity or end Ex) if the coupon rate is 4%x$1000 FV Par Value the value of the bond is $40. At the end of 1 year the price of the martket is $1150. 40/1150=3.5% THE HIGHER THE PRICE AT MATURITY the lower the yield
Discounting
Bring money to PRESENT VALUE FV+500 in one year PV is $476.19 you just discounted $500
Required Rate of Return
another name for discount rate- minimum return an investor requires to invest in an asset. the rate you want for investing your money into the asset based on the risk involved
Gordon Growth Model
Stock held BEYOND 1 Year
Beta
Systematic Risk of a type of stock. risk of bread as price changes in the whole grocery store
Idiosyncratic risk
particular to your company, controllable risk. Delta Airline can buy fuel from different vendor if the price is too high from the main vendor
Dodd-Frank Act DFC
federal law created to regain control of financial institutions by the federal gov after 2008 meltdown
Volcker Rule VRL
Limits hedge funds and proprietary trading
Sarbanes Oxley SOXF
regulation protect investors from fraud
S-1
Prospectus filed by SEC submitted by firms desiring to sell public securities
Form 10-Q
public firms submit quaterly to SEC
Rule 144A
Safe harbor protection not regulated by SEC PRIVATE CAPITAL to ACCREDITED INVESTORS
Reg-S
safe harbor protection NOT REGULATED BY SEC allows NON-US investors to invest in a US Company PRIVATE CAPITAL MARKET
