study

Question 1

working capital

Answer 1

current assets - current liabilities
current assets = accounts receivable, cash, marketable securities, inventory.
Current liabilities= accounts payable, current portion of mortgage payable.

Question 2

acid test ratio

Answer 2

Quick assets/current liabilities

quick assets = cash, marketable equity securities, accounts receivable

Question 3

accounts receivable turnover

Answer 3

sales/ average accounts receivable

Question 4

stockholders equity

Answer 4

total assets - total debt

Question 5

after tax cost of debt

Answer 5

pre tax cost of debt x (1- tax rate)

Question 6

Treynor index

Answer 6

The Treynor index is based on the premise that there are two components of risk:

Risk produced by fluctuations in the market
Risk produced by fluctuations of the individual stock
The index measures the portfolio return per unit of risk using the following equation:

(Portfolio return - Risk-free rate) ÷ Beta

Question 7

Sharpe Measure

Answer 7

measure of portfolio risk provides information similar to that of the Treynor index, except that the risk measure is the standard deviation of the portfolio rather than beta

Question 8

Jensen measure

Answer 8

The Jensen measure of portfolio risk measures the absolute value of performance of a portfolio on a risk-adjusted basis.

Question 9

poison put clause

Answer 9

a covenant that obliges the borrower to repay the bonds if a large quantity of common stock is held by a single investor and the bond rating is downgraded. This type of bond covenant is used as a defensive strategy to prevent hostile takeovers