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Exam 1

by: Samantha Colgan

Exam 1 Fin 305

Samantha Colgan
GPA 3.4
Survey of Finance
Roger Glenski

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Survey of Finance
Roger Glenski
Study Guide
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This 5 page Study Guide was uploaded by Samantha Colgan on Wednesday February 25, 2015. The Study Guide belongs to Fin 305 at Kansas taught by Roger Glenski in Fall. Since its upload, it has received 207 views. For similar materials see Survey of Finance in Finance at Kansas.

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Date Created: 02/25/15
Finance Exam One Study Guide VOCAB Finance All about managing money The art and science of managing wealth Using financial data to make sound decisions the creation of wealth Financial The activities that create or preserve the economic value of Management the assets of either an individual or corporation Corporate Set if financial activities that support the operation of a Finance business its use of money and those decisions that affect the wealth of its owners Every company has a person in charge of nance Investments Buying and selling of both real assets and financial assets such as stock or bonds and placing a value on them Examples include real estate timber gold commodities etc Financial The intermediaries which facilitate the cycle of money Institutions amp Markets Financial Examples include banllts insurance companies and brokers Institutions Foreign What is Wall Street s biggest market currency marlltet Valuation Valuing the financial securities of companies such as stocks and bonds Capital Evaluation and selection of the projects in which the company Budgeting will invest Assets What you own Liabilities What you owe Equity What remains the residual net worth book value Net Worllting Refers to the current assets and current liabilities of the firm Capital needed to run the day to day operations usually positive but not too big It is the primary cash receivables and inventory offset by accounts payables and accrued liabilities Firms often seellt bank loans to finance their working capital needs Top Line Revenue or sales Bottom Line Net income or loss Gross Margin Gross profit revenue Operating Operating profitrevenue shows up everywhere Margin Net margin The ultimate profitability of the company greatly affected by the capital structure of the firm and taxes Tax Rate Taxes income before tax Earnings Per Share Net income number of shares outstanding EBIT Earnings before interest and taxes operating income EBITDA Earnings before interest taxes amp depreciation amp amortization operating income depreciation OCF Operating Cash Flow after tax cash flow generated by the operations NOPAT Depreciation NOPAT Net operating income after tax Operating income 1 tax rate Free Cash Flow FCF The amount of cash left to paybacllt its owners or creditors metric often used in valuing a business cash flow from operations capital expenditures Returns What benefit were getting relative to the amount we originally invested Inventory How many times the company s inventory is quotturnedquot each Turnover year the higher the number of turns the better it costs money to have inventory sitting on the shelf so every time you sell an inventory item you presumably make a profit Days in The number of days inventory is on hand until it is quotturnedquot Inventory Days in How long on average it takes to collect a receivable the Receivables sooner collected the better because risllt increases and time looms Asset Turnover Answers the question quotHow much sales are generated by our asset basequot Current Assets Cash and assets that convert into cash within a one year time penod Current Liabilities Obligations that must be paid within one year including ST debU Working Capital A company39s current assets for instance cash inventory AR etc Working Capital How long it takes to go from cash going out to cash coming Cycle In Cash How long it takes for money to come back the length of time Conversion between actual cash expenditures used to pay fir productive Cycle resources and actual cash receipts from the sale of products or services Compounding Money grows in value over time therefore a dollar today is worth more than a dollar tomorrow Earning interest on your interest is the foundation of time value of money Present Value Worth of what you have today PV Interest Percent you re earning or being charged Discount Rate r or IY Number of Usually stated in years depends on how often compounding Periods N Future Value FV Equivalent in value to a specific amount today based on interest rate being applied Payment PMT Money amount occurring each time period example is a car payment Compounding Indicates how often the interest gets calculated Penods Annual The nominal or state able rate what society has decided the Percentage Rate APR amount you are being charged Fixed Capital Refers to the amount of FixedLong term assets the firm has Financial Capital Represents the amount of capital the firm needs to fund its NWC and Fixed Capital amounts FORMULAS Liquidity Ratios Current ratio Current assets Current liabilities Net working capital Current assets Current liabilities Asset Management Ratios Inventory turnover Cost of goods sold Inventory Days sales in inventory 365 Inventory turnover Receivables turnover Sales Receivables Days sales in receivables 365 Receivables turnover Payables turnover Cost of goods sold accounts payable Days in payments cycle 365 Payables turnover Total asset turnover Sales Total assets Debt Management Financial Leverage Ratios Debt ratio Total liabilities Total assets Financial Leverage Total assets Total stockholders equity Times interest earned ratio EBIT Interest expense Pro tability Ratios Gross pro t margin Gross pro t Sales Operating pro t margin Operating pro t Sales Net pro t margin Net income Sales Return on assets ROA Net income Total assets Return on equity ROE Net income Stockholders equity Per Share Ratios Earnings per share EPS Net income Number of common shares outstanding Dividend per share Dividends paid Number of common shares outstanding Book value per share BVPS Total Stockholders equity Number of common shares outstanding Dividend payout Dividends paid Net income Percentage change in value Ending value Beginning value Beginning value Implied rate in Invoice Terms Full price Discounted price A 365 days between payment Time Value of Mone E uations Future value of a lump sum FV PV 1 r A n Present value of a lump sum PV FV1r A N Future value of an Ordinary Annuity FV PMT rn r Present value of an Ordinary Annuity 1 Ory r Present value of a Perpetuity PV PMT r PVPMTgtlt Annuity Due PV annuity due PV ordinary annuity I r FV annuity due FV ordinary annuity I r


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