Test Review Flashcards
What is the Primary Market?
markets in which corprations raise new capital
what is the secondary Market?
Markets in which existing arealding outstanding Securities are traded
what are the types of Financial Institutions? (PICFM)
Pension Funds Investment banks commercial banks Financial Services Corportations Mutual Funds (PICFM)
Investment Banks?
type of financial insitiution that Investment banks traditionally help companies
raise capital. They (1) help corporations design
securities with features that are currently attractive
to investors, (2) buy these securities from the
corporation, and (3) resell them to savers.
Commercial Banks?
such as Bank of America,
Citibank, Wells Fargo, and JP Morgan Chase, are the
traditional “department stores of finance” because
they serve a variety of savers and borrowers
Financial Services Corporations?
large conglomerates
that combine many different financial institutions within
a single corporation
– Citigroup: commercial bank, IB, insurance, leasing
Pension Funds
Pension funds are retirement plans funded by
corporations or government agencies for their
workers
– Administered primarily by the trust departments of
commercial banks or by life insurance companies.
Mutual Funds?
corporations that accept money
from savers and then use these funds to buy stocks,
long-term bonds, or short-term debt instruments
issued by businesses or government units.
* Hedge fund, PEF : refer to the supplemental slide
credit unions?
a type of financial Institution. cooperative associations whose
members are supposed to have a common bond, such
as being employees of the same firm.
– Cheap source of funds, e.g, UNO Federal Credit Union
What are the advantages of a Proprietorship/Partnership?
Easy and inexpensive to form
Less Regulations
No Corporate Tax
What are the disadvantages of Proprietorship/Partnership?
Hard to raise large sums (Capital
Unlimited Liability
Limited Lifetime
Wht are the Advantages of a Corporation?
Easy to raise Capital
Limited Liability
Easy to transfer Ownership &Unlimited Life
How Do Mitigate Stockersholder/Mangager/Bondholder Conflicts?
Managerial Compensation Packers, Direct Intervention by Shareholders, The Threat Of firing, The threat of Takeover
How is capital transfered between borrowers and savers for Direct transfers
Bonds are sold from the business to the saver
How is capital transfered between borrowers and savers for Investment Banks
Securities are treansfered to the investment Bank. the saver gives money to the investment bank. the investment. banks gives securites to the saver
How is caopital transfered between borrowers and savers for Finacial Intermediaries
Business send securities to FI Svers give money to FI. the financial intermediary gives Intermediary Securities to saver
What is Total Debt
STD and LTD
Short term Debt includes?
Notes Payable
Non-Interest Bearing Liability includes?
Accounts Payable; Accurals
what is total Liability
Total Debt and Non-interest bearing Liability (Accounts Payable and Accuruals)
What are the 5 major Catergories of Ratios and what equation is Used for the following(LADPM)(24262)
Liquidity: Can we make required payments? (Current and Quick)
Asset management: Right amount of assets vs. sales?(FA and TA tunover, DSO,Inventory turnover)
Debt management: Right mix of debt and equity?(TIE and Debt to capital)
Profitability: Do sales prices exceed unit costs, and are sales high enough as reflected in PM, ROE, and ROA?(Operating margin, profit marine, BEP, Return on TA,Common Equity,Invested Capital)
Market value: Do investors like what they see as reflected in P/E
and M/B ratios? (Price/eaning Ratio) (Market/Book Ratio)
24262 FOR CHEAT CHEAT
Total Invested Capital Includes.
Long Term Debt, Short Term Debt, Notes Payable, an common stock
whats the Dupont Equation
ROE = PM X TAT X EM
ROE= NI SALES TA OVERALL: NI/ EQUITY OR ROA X EM
SALES TA EQUITY
How can you tell a companies financial position is weak or strong?
It can be difficult to tell whether a company is on balance in a strong or weak position BUT IF THE RATIO IS LESS THAN ONE IT’S POSITION IS WEAK
MVA
(Shares outstanding x Stock Price) - Common quity (CS)
EVA
Ebit(1-tax) - (Total Invested Capital(TD+CS) x % tax cost of capital)
