Exam I
Finance 3303 with Clay at University of Oklahoma
About this deck
By: Michelle Anderson
Created: 2009-02-12
Size: 56 flashcards
Views: 29
Created: 2009-02-12
Size: 56 flashcards
Views: 29
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a stream of equal periodic cash flows
Annuity
an annuity for which he payment occure at the beginning of each period
Annuity Due
Describes the process of calculating present values
Discounting
the annual rate of interest actually paid or earned, reflecting the impact of compounding frequency (true annual return)
Effective Annual Rate (EAR)
the value of an investment made today measured at a specific future date using compound interest
Future Value
an annuity for which the payments occur at the end of each period
Ordinary Annuity
a level or growing cash flow stream that continues forever
Perpetuity
the value today of a cash flow to be received at a specific date in the future assuming an opportunity to earn interest at a specified rate
Present Value
interest compounds four times per year
Quarterly Compounding
interest compounds twice a year
Semiannual Compounding
letter ratings assigned to bonds by specialized agencies that evaluate the capacity of bond issuers to repay their debs. Lower ratings signify higher default risk
Bond Ratings
the rate derived by dividing the bond's annual coupon payment by its par value
Coupon Rate
the risk that the corporation issuing a bond may not make all scheduled payments
Default risk
a bond sells at a discount when its market price is less than its par value
Discount
the date when a bond's life ends and the borrower must make the final interest payment and repay the principal
Maturity Date
the face value of a bond, which the borrower repays at maturity
Par Value
A bond that sells for more than its par value
Premium
bonds that pay no interest and sell below par value (also called zero-coupon bonds)
Pure Discount Bond
the rate of return that investors expect or require an investment to earn given its risk
Required rate of return
the discount rate that equates the present value of the bond's cash flows to its market price
Yield to Maturity
a measure of the speed with which a firm converts various accounts into sales or cash
Activity ratios
a measure of the proportion of total assets financed by a firm's equity (equity multiplier)
Assets-to-equity (A/E) ratio
a measure of inventory turnover, calculated by dividing the turnover figure into 365, the # of days in a year
Average age of inventory
the average amount of time that elapses from a sale on credit until the payment becomes usable funds for a firm. Calculated by dividing accounts receivable by average sales per day
Average collection period
the average length of time it takes a firm to pay its suppliers, calculated by dividing the firm's accounts payable balance by its average daily purchases
Average payment period (APP)
a measure of a firm's ability to meet its short-term obligations defined as current assets divided by current liabilities
Current Ratio
a measure of the proportion of total assets financed by a firm's creditors
Debit ratio
a measure of the firm's financial leverage, calculated by divided long-term debt b stockholders' equity
Debit-to-equity ratio
net income net of preferred stock dividents
Earnings available to common stockholders
earnings available for common stockholders divided by the number of shares of common stock outstanding
Earnings per share (EPS)
a measure of the proportion of total assets financed by a firm's equity
Equity Multiplier
a measure of the efficiency with which a firm uses its fixed assets, calculated by dividing sales by the number of dollars of net fixed asset investment
Fixed asset turnover
the net amount of cash flow remaining after the firm has met all operating needs and paid for investments, both long-term (fixed) and short-term (current). Represents the cash amount that a firm could distribute to investors after meeting all its other obligations
Free cash flow (FCF)
a measure of profitability that represents the percentage of each sales dollar remaining after a firm has paid for its goods
Gross Profit margin
a measure of how quickly a firm sells its goods
Inventory turnover
Calculating and interpreting financial ratios to assess a firm's performance and status
Liquidity ratios
a measure used to assess a firm's future performance by relating its market value per share to its book value per share
Market/Book (M/B) Ratio
a measure of profitability that represents the percentage of each sales dollar remaining after all costs and expenses, including interest, taxes, and preferred stock dividends, have been deducted
Net profit Margin
amount of cash flow generated by a firm form its operations. Mathematically, earnings before interest and taxes (EBIT) minus taxes plus depreciation
Operating Cash Flow (OCF)
measure of profitability that represents the percentage of each sales dollar remaining after deducting all costs and expenses other than interest and taxes
Operating profit margin
measure of a firm's long term growth prospects that represents the amount investors are willing to pay for each dollar of a firm's earnings
Price/Earnings (P/E) Ratio
measure of a firm's liquidity that is similar to the current ratio except that it excludes inventory, which is usually the least-liquid current asset
Quick (acid-test) ratio
measure that captures the return earned on the common stockholders' (owners') investment in a firm
Retur on common equity (ROE)
measure of the overall effectiveness of management in generating returns to common stockholders with its available assets
Return on total assets (ROA)
measure of the firm's ability to make contractual interest payments, calculated by dividing earnings before interest and taxes by interest expense
Times interest earned ratio
a measure of the efficiency with which a firm uses all its assets to generate sales' calculated by dividing the dollars of sales a firm generates by the dollars of asset investment
Total asset turnover
the conflict between the goals of a firm's owners and its managers
Agency Problems
selecting the best projects in which to invest the resources of the firm, based on each project's perceived risk and expected return
Capital budgeting function
developing ownership and corporate governance structures for companies that ensure that managers behave ethically and make decisions that benefit shareholders
Corporate Governance Functions
in U.S. law, a separate legal entity with many of the same economic rights and responsibilities as those enjoyed by individuals
Corporation
raising capital to support companies' operations and investment programs
External Financing Function
managing firms' internal cash flows and its mix of debt and equity financing, both to maximize the value of the debt and equity claims on the firms' and to ensure that companies can pay off their obligations when they come due
Financial Management Function
one or more totally passive participants in a limited partner ship, who do not take any active role in the operation of the business and who do not face personal liability for the debts of the business
Limited Partners
sales of securities to investors by a corporation to raise capital for the firm
Primary-Market Transactions
managing firm's exposures to all types of risk, both insurable and uninsurable, in order to maintain optimum risk-return trade-offs and thereby maximize shareholder value
Risk Management Function
trades between investors that generate no new cash flow for the firm
Secondary-market Transactions
About this deck
By: Michelle Anderson
Created: 2009-02-12
Size: 56 flashcards
Views: 29
Created: 2009-02-12
Size: 56 flashcards
Views: 29
About StudyBlue
STUDYBLUE makes things that make you better at school.
Things like online flashcards with photos and audio.
Things like personalized quizzes and friendly reminders about when (and what) to study next.
Think of it as a digital backpack™: access to all of your study materials online and on your phone.
STUDYBLUE exists to make studying efficient and effective for every student, for free. Join us.
“I have used this website for three exams, and I see a huge difference in my test results.”
Naj
Naj