Week 1 (Chapter 1 & 2) Flashcards
This includes information from the class notes. (50 cards)
Ratio Analysis
- Liquidity
- Efficiency
- Profitability
- Financing
Current Ratio
Current Assets / Current Liabilities
Quick Ratio
Cash + AR + Marketable Securities / Current Liabilities
Total Asset Turnover
Sales / Total Assets
Average Collection
Accounts Receivable / Sales x 365
Inventory Days
Inventory / COGS x 365
Accounts Payable Days
Accounts Payable / COGS x 365
Cash Conversion Cycle
AR Days + Inventory Days - Accounts Payable Days
Corporate Finance (definition)
The practice of managing the money that flows in and out of businesses
Financial Managers Duties
- Financing
- Financial Management
- Capital Budgeting
- Risk Management
- Corporate Governance
Financing Function
Raising capital to support a company’s operations and investment programs
Financial Management Function
Managing a firm’s day to day cash flows and determining the optimal holdings of short term assets and developing short and intermediate term financial plans so that the firm can adequately operate
Capital Budgeting Function
Selecting the best projects in which to invest the firm’s resources, based on each project’s perceived risk and expected return
Risk Management Function
Managing the firm’s exposure to risk in order to maintain the optimum risk-return trade-off and thereform maximize shareholder value
Corporate Governance Function
Developing a corporate governance structure capable of ensuring that managers act ethically and in stockholders’ interests
On ownership interest is called _________ and money borrowed from creditors is termed __________.
equity, debt
Captial raised by professional investors are ______________.
venture capitalists
Primary Market Transaction
When a corporation sells securities to investors to raise capital
Secondary Market Transactions
Trades between investors, which generate no cash for the firm but makes the securities attractive to other investors which raises the price
Money Market
The market for debt issuance maturing in one year or less
Notes
Longer term debt instruments maturing in less than 7 years
Corporate Bonds
Debt instruments with maturities of more than 7 years
Hedge
The act of offsetting market risks such as interest-rate and currency fluctuations.
Securities and Exchange Commission (SEC)
Federal agency that oversees the fiar reporting of financial information to investors of public companies
