Corporate Finance Flashcards
How Country Risk Premium can be described?
Sovereign yield spread (between yields on the country’s government bonds and a developed country’s government bond)
How CAPM can be described?
Kce= Rf+β[E(Rmkt)-Rf] for the case of developing country, CPR will be added.
What is factoring?
Sales of receivable without recourse.
What is the degree of financial leverage (DFL)?
percent change in earnings per share for a given percent change in operating income.
What is the degree of operating leverage (DOL)?
percent change in operating income for a given percent change in sales.
What is the degree of total leverage (DTL)?
percent change in earnings per share for a given percent change in sales. Equals DFL*DOL
What is flotation cost?
Costs associated with issuance. Should be included in initial cash outlay according to CFA.
What is financial leverage?
Using more debt compare to equity.
Increase in tax rate will give what impact to WACC?
Reduce after-tax cost of debt and therefore WACC.
What is the role of nomination committee?
Review the performance, independence, skills , and experience of board members as well as recruiting new board members and creating board nomination policies.
What best measures the pretax cost of debt financing?
Yield to maturity.
What is current ratio?
Current assets/ current liabilities.
What is quick ratio?
Cash+ short term marketable securities+ receivable/ current liabilities (removing inventories from current ratio.)
