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FIN 201 FINAL EXAM Flashcards

(54 cards)

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1
Q

What are the 3 subspecialties of finance?

A
  1. Corporate finance
  2. Investments
  3. Institutions
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2
Q

What are 9 career options within finance?

A
  1. Commercial finance
  2. Corporate finance
  3. Insurance
  4. Investment banking
  5. Money management
  6. Real estate
  7. Hedge funds
  8. Private equity
  9. Financial planning
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3
Q

What are the 5 ways finance fits into business management? MOOSA

A
  1. Marketing
  2. Operations/ supply chain
  3. Accounting
  4. OB/HR
  5. Strategic management
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4
Q

What is accrual based accounting?

A

Based on matching principles of revenue and expense

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5
Q

Why is historical cost so important?

A

Historical cost, which is normally a lot less than current market value, is the number that is put on the statement. Better for taxes and such.

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6
Q

Balance sheet includes…

A

 LHS
 RHS
 It is a snapshot in time
 A = L + E

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7
Q

Income statement is…

A

 A basic flow- operations, investment, and financial

 Covers a period of time

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8
Q

Net Income =

A

NI = DIV + RE

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9
Q

Statement of Cash Flows

A

 Operations, investing, financing,

 Focus on free cash flow

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10
Q

What are the strategies for earnings management?

A
  1. Watch inventories
  2. Beware of rising receivables
  3. Uncover extraordinary expenses
  4. Investigate asset sales
  5. Find who is skimping on research
  6. Find when revenue is really not
  7. Spot out balance growth
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11
Q

DuPont Formula

A

ROE = (NI/S * S/A) / (1- D/A)

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12
Q

EVA

A

NOPAT – [ WACC * Costly Capital]

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13
Q

FCFF

A

EBIT – Cash tax payment + Depreciation – CAPEX – increase in NWC

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14
Q

NOPAT

A

EBIT – Taxes
or
NI + Interest

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15
Q

Costly Capital

A

AP + LTD + CS + RE

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16
Q

CAPEX

A

Year 0 Net – Year 1 Net + Depreciation

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17
Q

Increase in Net Long-Term Debt

A

(Year 1 CA- Year 0 CA) + Depreciation

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18
Q

FCFE

A

NI + Depreciation – CAPEX – Increase in NWC + Increase in Net Long-term debt

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19
Q

Liquidity Ratios

A 
	CR = CA/CL
	QR = (CA-Inventory)/CL
	ACP = AR/DCS
	AR Turn = CS/AR
	Inventory Turn = COGS/Inventory
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20
Q

Efficiency Ratios

A

 TAT = S/TA
 FAT = S/FA
 OIROI = EBIT/TA

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21
Q

Financing Ratios

A

 DR = D/A
 Debt-to-Equity = D/E
 TIE = EBIT/Interest Expense

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22
Q

Profitability Ratios

Study These Flashcards
A 
ROA = NI/A
ROE = NI/E
     = 	NI/S		* 	S/A 	* 	A/E
     = Net profit margin * Asset Turnover * Leverage Multiplier
GM = GP/S
OM = EBIT/S
NM = NI/S
23
Q

How can you reduce DFN?

Study These Flashcards
A
  1. Reduce growth
  2. Review fixed assets
  3. Review dividends
  4. Price changes (usually results from growth reduction)
24
Q

Calculating DFN

Study These Flashcards
A

 Projected LHS – Projected RHS

25
Payout Ratio
Dividends / NI
26
Plowback Ratio
 (1 – [DIV/NI])
27
Calculating Retained Earnings
 New RE = Old RE + NI – Dividends |  Projected Sales * (NI/S) * (1 – Cash Dividends/ NI)
28
Calculating SGR (Standard Growth Rate)
 ROE * (1 – Div/NI) |  NI/E * (1 – Div/NI)
29
IGR (Internal Growth Rate)
 ROA * (1 – Div/NI) |  Maximize sales growth with no new external finance
30
Effective Yield (APR, EAR) Formula
 (1 + i/m)^m – 1
31
EAR Formula
 (1 + [APR/m])^m – 1
32
Current Yield
 An approximate for YTM  = (Annual Coupon / Market Price)  = Today’s value (PMT amount) / Present Value
33
PV Formula
FV / (1 + i)^n
34
FV Formula
PV * (1 + i)^n
35
Face/Par/Mature Value
ALL MEAN THE SAME
36
Return Formula
 Dividend Yield + Capital Gains Yield
37
Single HPR
 [Dividend PMT * (P1 – P2)] / P0
38
GGM (Gordon Growth Model)
 V0 o D1 / (Kcs – G) o [D0 * (1 + G)] / (K- G) o With Growth: [CF0 * (1 + G)] / (Kcs – G) o Without Growth: [CF0 * (1 + 0)] / (Kcs – 0) = CF0 / Kcs
39
Sharps Ratio (Risk Adjusted Return)
 [E(R) – R(E)] / SD
40
D0 vs. D1
 D0 = Historical Dividend |  D1 = Next Year’s Dividend
41
FCFF Uses...
Uses WACC
42
FCFE Uses..
Uses Ke
43
Holding Period Formula
 [Capital Gains + Dividend Gains] / Initial cost |  AKA: [(P1 – P0) + DIV] / P0
44
Annualized Return
 [(P1 – P0 + CF1) / P0] * [360 / Holding Period]
45
Expected Return
 Sum (PtRt)
46
RRR Formula
Rf + Risk Premium
47
Measuring Systemic Risk
Plot points on a scatter plot and use LINEAR REGRESSION
48
Security Market Line
 [(Rm – Rf) * β ]+ Rf
49
Build-Up Method
 Bond Yield + Equity Risk Premium + Micro Cap Premium + Start- Up Risk Premium
50
Market Specific Risk
1. Not diversifiable risk 2. Systematic 3. Market 4. beta
51
Firm Specific Risk
1. Diversifiable risk 2. Unsystematic 3. Firm Specific 4. Idiosyncratic
52
Market Risk Premium is
(Rm – Rf)
53
Risk Premium is
β * (Rm – Rf)
54
Total Risk
= standard deviation | = Square root of [sum of (Ri – Rmean) ^2 * Pi]

Finance (3 decks)

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