Topic Two Finance Flashcards
1
Q
Types of Firms
A
- Firms that provide their owners with income levels
comparable to what they could have earned working for much larger firms.
Lifestyle firms: - Firms that allow owners to pursue specific lifestyles while being paid for doing what they like to do.
Entrepreneurial ventures: - Entrepreneurial firms that are cash flows- and
performance-oriented as reflected in rapid value creation over time
2
Q
Componements of a Sound Business
A
- Generate Revenues
- Make Profits
- Produce Free Cash Flows
3
Q
Best Practices of High Growth
& Performance Firms
A
Marketing Practices
* Financial Practices
* Management Practices
4
Q
Net Profit Margin (NPM):
A
net profit divided by revenues
5
Q
Asset Intensity:
A
total assets divided by revenues, the reciprocal of asset turnover (so ATO = Revenues/Total Assets)
6
Q
Return on Assets (ROA):
A
net after-tax profit divided by total
assets
7
Q
ROA Model:
A
ROA = NPM × ATO
8
Q
A
