Overview of Finance

Question 1

Treasury Securities

Answer 1

Example is BOND issued by Fed Govt. to raise money

Question 2

Bond

Answer 2

also a Debt, similar to loans used by city governent to build schools, roads

Question 3

Preferred Stock

Answer 3

Also called Hybrid, paid first during bankruptcy, pays dividends in arrears

Question 4

Primary Stock

Answer 4

First Market to raise capital. Wells Fargo, Bank of America

Question 5

IPO

Answer 5

Initial Public Offering- first time stocks and bons are sold to raise money in Primary Market

Question 6

S-1

Answer 6

PROSPECTUS/ contains business info address, board of directors FINANCIAL OVERVIEW OF COMPANY REQUIRED FOR IPO

Question 7

Secondary Market

Answer 7

After the 1st marlet example: :NYSE buy and sell stocks and bonds after IPO NYSE is the largest market

Question 8

Dealer Martket

Answer 8

No physical location, National Association of Securities Dealers Automated Quotations (NASDAQ) is an example

Question 9

Auction Market

Answer 9

NYSE is an example buy and sell stocks and bonds

Question 10

Risk

Answer 10

Potential loss or gain of a transaction UNKNOWN FACTOR

Question 11

Income Statements

Answer 11

Measured over a period Jan-Dec

Revenue-Expenses

Question 12

Balance Sheet

Answer 12

Assets=Liabilities+Equity

Own=Owe+Stock buy in my company- Measured at a point in a period

Question 13

Statement of cash flows

Answer 13

flow = direction of cash

cash in coming in or leaving

Question 14

Accounting

Answer 14

business function responsible for creating and recording of financial information

Question 15

Net Income

Answer 15

Company FINAL INCOME. after deducting tax

Question 16

EBIT

Answer 16

Earnings before interest and tax

OPERATING INCOME

Question 17

Operating Income

Answer 17

Sales - Operating Expense

Question 18

Operating Expense

Answer 18

Rent Salaries, Depreciation

Question 19

Interest Ezpense

Answer 19

Interest the BANK charges on the money you owe DEBT

Question 20

CAPEX

Answer 20

CAP is for Capital

EX is for expenditures money spend on long term assets such as Machines, plant, property, PPE

Question 21

NWC

Answer 21

net working capital Current assets-current Liabilities looking at the funds at hand to keep the business running

Question 22

FCF

Answer 22

Free Cash Flow leftover cash after bills and taxes are paid

Question 23

Ratio Analysis

Answer 23

compare financial relationship sales=4 expense=2 ratio is 4/2=2 SALES ARE twice my expense

Question 24

annuity

Answer 24

recurring payment same payment same collection each time of the year/month

Question 25

Ordinary annuity

Answer 25

paid at the END Credit card end of 30 days

Question 26

annuity due

Answer 26

due at the beginning APARTMENT

Question 27

APY and effective yield

Answer 27

annnual interest rate including compounding APR is used to calculate APY

Question 28

Par Value

Answer 28

Face Value $1000

Question 29

YTM

Answer 29

yield to maturity current yield, amount made from the purchase date of the bond to its maturity or end Ex) if the coupon rate is 4%x$1000 FV Par Value the value of the bond is $40. At the end of 1 year the price of the martket is $1150. 40/1150=3.5% THE HIGHER THE PRICE AT MATURITY the lower the yield

Question 30

Discounting

Answer 30

Bring money to PRESENT VALUE FV+500 in one year PV is $476.19 you just discounted $500

Question 31

Required Rate of Return

Answer 31

another name for discount rate- minimum return an investor requires to invest in an asset. the rate you want for investing your money into the asset based on the risk involved

Question 32

Gordon Growth Model

Answer 32

Stock held BEYOND 1 Year

Question 33

Beta

Answer 33

Systematic Risk of a type of stock. risk of bread as price changes in the whole grocery store

Question 34

Idiosyncratic risk

Answer 34

particular to your company, controllable risk. Delta Airline can buy fuel from different vendor if the price is too high from the main vendor

Question 35

Dodd-Frank Act DFC

Answer 35

federal law created to regain control of financial institutions by the federal gov after 2008 meltdown

Question 36

Volcker Rule VRL

Answer 36

Limits hedge funds and proprietary trading

Question 37

Sarbanes Oxley SOXF

Answer 37

regulation protect investors from fraud

Question 38

S-1

Answer 38

Prospectus filed by SEC submitted by firms desiring to sell public securities

Question 39

Form 10-Q

Answer 39

public firms submit quaterly to SEC

Question 40

Rule 144A

Answer 40

Safe harbor protection not regulated by SEC PRIVATE CAPITAL to ACCREDITED INVESTORS

Question 41

Reg-S

Answer 41

safe harbor protection NOT REGULATED BY SEC allows NON-US investors to invest in a US Company PRIVATE CAPITAL MARKET