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FIN 300 > Weeks 1 to 3 > Flashcards

Weeks 1 to 3 Flashcards

1
Q

Income Statement

A

Income, expenses —> profit/loss

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2
Q

Balance Sheet

A

Assets = Liabilities + Stockholder’s equity

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3
Q

Statement of Cash flows

A

Sources of cash (to raise money):

  • decreasing/selling assets
  • increasing liability (getting a loan)
  • net profit
  • depreciation (non cash expense)
  • sale of stock (sell stocks)

uses (to lower money)

  • buy assets to use (increase)
  • pay off loans (decrease liability)
  • net loss
  • cash dividents
  • stock repurchase
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4
Q

Statement of retained earnings

A

net profits reinvested by the firm to finance future growth

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5
Q

Ratio analysis’ purpose

A

to monitor, analyze, compare the health of a firm to itself and/or its competitors

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6
Q

cross-sectional analysis

A

compare the firm to its competition

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7
Q

time series

A

compare the firm to itself overtime

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8
Q

combination

A

compare the firm and its competition overtime

combo of cross-sectional analysis and time series

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9
Q

liquidy

A

the ability of the firm to pay off its short-term debts

measured with NWC, VR, and QR

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10
Q

NWC

A

networking capital ($)

NWC = CA - CL

for liability

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11
Q

CR

A

current ratio

CR = CA/CL

for liability

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12
Q

QR

A

quicker acid-test ratio

QR = (CA - Inv) / CL

for liability

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13
Q

Activity or efficiency

A

measures asset efficiency and the ability of assets in generating sales

measured with ITO, ACP, FATO, TATO

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14
Q

ITO

A

inventory turnover

ITO = COGS/Inv

for activity or efficiency

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15
Q

ACP

A

average collection period: time needed to turn credit sales into cash

ACP = acc. receivables / credit sales per day

for activity or efficiency

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16
Q

FATO

A

fixed asset turnover: the efficiency of fixed assets in generating sales

FATO = sales/FA

for activity or efficiency

17
Q

TATO

A

total asset turnover

TATO = sales/TA

for activity or efficiency

18
Q

debt or leverage

A

the use of outside financing (debt) in earning a profit

measured with DR, DER, TIER

19
Q

DR

A

debt ratio: percentage (%) of total funds supplied by creditors

DR = total debt / total assets = TB/TA

for debt of leverage

20
Q

DER

A

debt to equity ratio: amount of debt for every dollar of equity

DER = L-T debt / stockholder’s equity

(long term debt / SE)

for debt of leverage

21
Q

TIER

A

times interest earned ratio: interest payment coverage

TIER = (operating profits / interest)

for debt of leverage

22
Q

Profitability

A

measure of managements’ success

measured with GPM, OPM, NPM, ROI, ROE

23
Q

GPM

A

gross profit margin

GPM = GP / sales

for profitability

24
Q

OPM

A

operating profit margin

OPM = OP / sales

for profitability

25
Q

NPM

A

net profit margin

NPM = NP / sales

for profitability

26
Q

ROI

A

return in investments (total assets)

ROI = NP / TA
(net profits / total assets)

for profitability

27
Q

ROE

A

return on equity

ROE = NP/SE
(net profits / stockholders’ equity)

for profitability

28
Q

EPS

A

earning per share

EPS = EACS / (# shares of common stock)

for evaluation

29
Q

P/E

A

price-earning ratio: what $1 in EPS is worth to an investor

P/E = common stock price / EPS

for evaluation

30
Q

DPS

A

dividends per share

DPS = dividend/share = total dividend / # shares of CS

for evaluation

31
Q

POR

A

payout ratio: % of EPS paid out as a dividend

POR = DPS / EPS
payout ratio = dividend per share / earning per share

32
Q

PBR

A

plow-back ratio: percent of EPS retained

PBR = 1 - POR
1 - payout ratio

33
Q

two types of selling expenses (floatation costs) that a firm must pay

A

1: underwriter’s spread = gross price - net proceeds
2: issuance cost = common stock (most expensive), preferred stock, bonds (least expensive)

34
Q

t-bills or t-bonds

A

investments that are risk free because they are guaranteed by the US Treasury. there are no safer investments in the world

R(rf) = t bill or t-bond rate (given)
or r + IRP
or real rate + expected inflationary risk premium

35
Q

i

A

i = r + IRP + other risks (-default - maturity - liquidity)

i = normal (observed or actual) rate of interests

36
Q

How dividends affect finance

A

Balance sheet: cash dividends are subtracted from RE or Cash

Projected CE: stock dividends that are paid for are ADDED to current CE

37
Q

Total debt and total assets (calculation)

A

TD = CL + LT debt

TA = CA + FA

38
Q

Cash calculation

A

Cash = Total CA - Inv - A/R

FIN 300 (3 decks)

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