3/27/2023 Flashcards by Jordan Reynolds

Draw The Balance Sheet

Components:
CA
LTA
OA
CL
LTL

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What are

Current Assets

Current Liabilities

CA - Assets that can be liquidated in 12 months

CL - Liabilities that need to be paid in the next 12 months

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Income Statement

Shows How much The Company Made or Lost during the specified period of time

Revenue - Operating expenses = Net Revenue
- Taxes = Net Earnings
- Dividends = Retained Earnings

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P&L

(Profit and Loss Statement)

Same as Income Statement

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List out all Ratios/ Formulas For Income Statement

P/E Ratio
EPS
EPS fully diluted
Dividend payout Ratio
Debt Service Ratio

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Net Present Value

What its worth - How much it Cost to have it

usually reflected in $ signs

If NPV is negative its probably not a good investment

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What’s an example of Net Present Value

Stock Worth $110
Current Stock Price: $100

NPV $10

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IRR

Internal Rate of Return

the rate you actually get compared to what’s expected

The Rate you actually get - the Expected rate

is shown in ___%

DOES NOT ADJUST FOR INFLATION

Shown how much of your rate of return is value (how much is more than what they market is paying)

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Standard Deviation

The amount the Stock price Fluctuates

High Fluctuation = High Standard Deviation
Low Fluctuation = Low Standard Deviation

You want your return to be as close as possible to the standard deviation

is Shown in ___%

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Whats an example of Standard Deviation

Expected Return 12%
Standard Deviation 5

Means the Security might return anywhere from 7% to 17% most of the time

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Beta

Measures the volitility of a security compared to the market

Market is always a 1

the stock might be a 1.1 or .7

Higher Return = Higher Risk

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example of Beta

Market return is 10%
securities Beta is 1.2

means return would be 12%

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Alpha

Measure of how much a portfolio out preforms the market

Beating the market isnt Impressive but beating it without taking any extra risk IS

Alpha is reflected in
+___% means you out preformed the market by __%
or
-___% Means you under preformed the market by __%

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Correlation

Positive Correlating - if 2 Securities go up and down at similar times and at similar rates

Negative Correlating - if 2 Securities DONT go up and down at similar times and at similar rates

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Working Capital

current Assets - current liabilities

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Current Ratio

Current Assets/ Current Liabilities

Higher # = Higher Liquidity of the company

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Quick Ratio

Current Assets - Inventory = Quick Assets

Quick Assets/current Liabilities = Quick Ratio

Higher # = Higher Liquidity of the company

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Cash Asset Ratio

Cash and Equivelants / Current Liabilities

Higher # = Higher Liquidity of the company

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Types of Municipal Bonds

General Obligation

Revenue

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CMO’s

Collateralized Mortgage Obligation

A Pool of Mortgages That pay interest to Investors

Issued By Goverment Agencies or Private Finance Companies

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Risks of CMO’s

Prepaid Risk - Interest rates go Down - Homeowner pays off mortgage early

Extension Risk - Interest rates go Up - Homeowner pays off mortgage late

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types of Cmo’s

Study These Flashcards

PO - principle Only
IO - Interest Only
PAC - Planned Ammortization Class (Most protection)
TAC - Target Ammortization Class
Private Label - (Issued by private sector)

STRIPS

Study These Flashcards

Zero coupon bond issued by the US goverment

To hedge against a short sell what options should you do

Study These Flashcards

Buy calls against the shorted security

what action can reset the holding period for short and long term gains and losses

Buying a put

P/E (Price To Earnings Ratio)

Price of Stock / EPS

EPS (Earnings Per Share)

Net Earnings / # Shares Outstanding

EPSFD (Earnings Per Share Fully Diluted)

Net Earnings / # Shares Outstanding Assuming all convertible securities issued by company have been converted into common stock

Dividend Payout Ratio

Dividends per share / EPS Or just Total Company Dividends paid / Net Earnings if they give both of those in the question

Audited Statement

Accurate Numbers CPA's Verify the books Big Companies publish these 2x per year

UnAudited Statements

just a ball park figure of what a companies books look like

Cash Accounting

Cash if posted on books whenever its received or payed

Accrual Accounting

You can post items on your books before you actually recieve it or pay it

Give example of Accrual Accounting

Boeing gets a $20 MILLION contract to make planes but will be paid that in 4 years. instead of it being reflected on the books in 4 years it can be reflected now

Mean

Average

Median

The Middle #

Mode

Which Occurs Most often

Lower Standard Deviation =

Lower Risk

Higher Standard Deviation =

Higher Risk

If IRR is greater than Expected Return what happens to NPV

NPV = Positive

Real Rate of Return

Is the rate of return minus inflation shows what the actual purchasing power will be of that return

process of solving Inflation Adjusted After-tax Yield Questions

1) Take out taxes 1st 2) Take Out Inflation 2nd

How to calculate how much 2 securities are correlating

divide the bigger return by the smaller return (ignore if a security has a negative return) ie: +4% -12% means negatively correlating by 3 ie: +4% +16% means positivly correlating by 4

If you want to pick 2 securities that are most diverse from Eachother

Pick the 2 that are most NEGATIVELY Correlating

List All Types of Money Market Securities

T Bills T Notes (If they mature in less than 12 months) T Bills (If they mature in less than 12 months) Negotiable (Jumbo) CD's Commercial Paper Bankers Acceptance REPO (Repurchase agreement)

Negotiable (Jumbo) CD's

100k Face amount Just like normal bank CD's but much bigger and can be bought and sold

Commercial Paper

pool of debt issued by a company to investors 270 day max duration Ususally has no Interest and sold at a discount to par (like zero coupon bond)

Bankers Acceptance

Great for Imports and Exports a loan from a bank that pays the exporter to ship the goods then is paid back by the Importer once shipment is recieved

REPO (Repurchase agreement)

instead of getting a loan from the bank company sells the bank their own securities with a contract to buy them back at a specified date and Price (usually higher than when bank bought them)

Municipal Bonds Interest are Taxed

Federal - Tax-Free State - Tax Free (If Resident of State) Local - Tax Free (If resident of Locality)

Muni Bonds Issued by a Territory interest are taxed

Tax free at all levels

Treasury Securities Interest is taxed how

Federal - Taxed State - Tax Free Local - Tax Free

Difference between Normal Revenue bonds and Double Barrel Bonds

Normal Revenue Bonds are not additionally backed by Municipality in the event of facility defaulting whereas double barrel bonds are

Are IDR bonds taxed?

Some are and some aren't it depends upon who is benefiting from it

3/27/2023 Flashcards

(54 cards)