Chapter #1 Flashcards
What does a simple percent change represent?
A change as part of the old or earlier value
How do you change a decimal to a percent and vice versa?
- Multiply decimal by 100 to get %
- Divide percent by 100 to get decimal
What does a smaller standard deviation show?
Less uncertainty
If both the bottom and top of a fraction increase, which direction will the value of the whole fraction change?
Depends on if the change in the numerator or denominator is larger
Which area deals with how a firm should be financed?
Capital Structure
Which area deals with how much of a firm’s assets should be held in cash, inventory, and accounts receivable?
Working Capital Management
What is the goal of a corporate financial manager?
To maximize the market share
What are the 3 major factors that determine stock prices?
- Future Cash Flows
- Timing of cash flows
- Risk
How can managers maximize stock prices?
- Minimize risk
- Keep costs down
- Generate as much cash as possible
What price do you pay when purchasing stock?
Ask (sell) price
Which is higher for dealers: ask or bid price?
Ask prices always exceed the bid prices
What is the total return on any investment?
Total Return = Capital Gain + Income
What is the process of planning, evaluating, selecting, and managing the financing of long term operating projects of the company (financing firm)?
Capital Budgeting
Company chooses new product to introduce to the market
Capital Budgeting
Company chooses to sell a bond to finance a new product
Capital Structure
