Midterm Flashcards
(48 cards)
Money Markets
the markets for debt securities with maturities of less than 1 year
Capital Markets
markets for long-term debt and corporate shares
Primary Markets
the markets in which corporations raise new capital; secondary markets are for existing, already outstanding securities
WACC
the weighted average cost of capital is the average return required by all of the firm’s investors; it is determined by the firm’s capital structure, interest rates, risk, and the market’s attitude towards risk
Balance Sheet
snapshot of the firms’s financial position at a point in time; shows assets on the left in order of liquidity, and liabilities on the right in the order that they must be paid
Income Statement
reports the results of operations over a period of time, and it shows EPS as its “bottom line”
Statement of Changes in Equity
shoews the change in equity between balance sheet dates
Statement of Cash Flows
reports the effect of operating, investing, and financing activities on cash flows over an accounting period
Net Cash Flow
differs from accounting profit because some of the transactions and events reflected in accounting profits may not have been received or paid out in cash during the year
Operating Current Assets
the current assets that are used to support operations, such as cash, inventory, and accounts receivable; they do not include short-term investments
Operating Current Liabilities
current liabilities that occur as a natural consequence of operations, such as accounts payable and accruals; they do not include notes payable or any other short-term debts that charge interest
NOWC
net operating working capital is the difference between the assets and liabilities used to support operations; the difference between operating current assets and operating current liabilities; does not include notes payable or any other short-term debt that charges interest; the working capital aquired with investor-supplied funds
Operating Long-Term Assets
the long-term assets used to support operations, such as net plant and equipment; does not include long-term investments that pay interest or dividends
TNOC
total net operating capital, or operating capital, or net operating assets; the sum of net operating working capital and operating long-term assets; it is the total amount of capital needed to run the business, and equal to investor-supplied operating capital
NOPAT
net operating profit after taxes; it is the after-tax profit a company would have if it had no debt and no investments in nonoperating assets; a better measure of operating performance than net income beccause it excludes the effects of financial decisions; EBIT(1 - Tax Rate)
ROIC
return on invested capital; equal to NOPAT divided by total net operating capital; it measures the rate of return the operations are generating; the best measure of operating performance
Free Cash Flow (FCF)
the amount of cash flow remaining after a company makes the asset investments necessary to support operations; the amount of cash flow available for distribution to investors; the value of a company is directly related to its ability to generate free cash flow; NOPAT - Net Investment in Operating Capital
EBIT
earnings before interest and taxes; a firm’s sales minus its cost of goods sold and other operating expenses
COGS
cost of goods sold; includes labour, raw materials, and other expenses directly related to the production or purchase of the items or services sold
Working Capital
a firm’s investment in short-term assets – cash, marketable securities, inventory, and accounts receivable
Total Investor-Supplied Operating Capital
the total amount of short-term debt, long-term debt, preferred shares, and total common equity shown on a balance sheet; it is the amount of financing used in operations that investors have provided to a company; also called investor-supplied operating capital
Net Working Capital
current assets minus current liabilities; diffferent from net operating working capital, because current assets and current liabilities may contain non-operating accounts such as short-term investments and short-term loans
Net Investment in Operating Capital
the change in total net operating capital from the previous year, which represents the net amount that the company has spent on operating capital during the year
Current Ratio
(Current Assets/Current Liabilities); liquidity ratio that shows the firm’s ability to meet maturing debts
