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FIN 316 Study Guide

by: devinau Notetaker

FIN 316 Study Guide FIN 316

Marketplace > University of Oregon > Finance > FIN 316 > FIN 316 Study Guide
devinau Notetaker
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Study guide includes terms and formulas used on exams and quizzes
Financial Management
Vineet Bhagwat
Study Guide
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This 3 page Study Guide was uploaded by devinau Notetaker on Saturday April 2, 2016. The Study Guide belongs to FIN 316 at University of Oregon taught by Vineet Bhagwat in Spring 2016. Since its upload, it has received 37 views. For similar materials see Financial Management in Finance at University of Oregon.


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Date Created: 04/02/16
Chapter 2: Introduction to Financial Statement Analysis  ­ Financial Statements= Accounting reports issued by a firm periodically presenting past  performance information and snapshot of firm’s assets and financing of those assets  ­ 10K= Annual report, Must send to shareholders each year  ­ 10Q= Quarter report  ­ GAAP= Generally Accepted Accounting Principles, Providing common set of rules and  standards in reports  ­ Auditor= Neutral third party to check annual financial statements with GAAP consistency  ­ Balance Sheet= Statement of Financial Position, Lists firms assets and liabilities  providing snapshot of firms financial position at a given point in time  ­ Assets= Liabilities + Stockholders’ Equity  ­ Current Assets= Market Securities (short term low risk investment  maturing in one year), A/R, Inventories, Catch­all category (prepaid  expenses, rent, etc)  ­ Long Term Asset= Assets produce tangible benefits more than a year  ­ Current Liabilities= Liabilities satisfy in one year, A/P, N/P, short term  debt, accrual items (taxes, salary, owed but not yet paid)  ­ Net Working Capital= Capital available in short term to run business  ­ NWC= Current Assets ­ Current Liabilities  ­ Negative or Low NWC faces shortage of funds  ­ Long Term Liabilities= Liabilities extend beyond one year  ­ Book Value of Equity= Shareholders’ Equity, Net worth of firm from  accounting perspective  ­ Liquidation Value= Value of firm after its assets are sold and liabilities  paid  ­ Market Capitalization= Market price per share * Number of shares  outstanding  ­ Market to Book Ratio= Price to Book Ratio, Ratio of firms market cap to book  value of stockholders’ equity, Public expectation vs firms historic owned assets  ­ Market Value of Equity / Book Value of Equity  ­ Value Stocks= Low MtB ratio  ­ Growth Stocks= High MtB ratio  ­ Enterprise Value= Assess value of underlying business assets, What it cost to  buy all equity of a firm and pay off its debt  ­ EV= Market Value of Equity + Debt ­ Cash  ­ Income Statement= P&L Statement, Lists firms revenues and expenses over period of  time  ­ Net Income= Earnings, Measure of profitability  ­ Gross Profit= Difference between sales revenues and costs of sales  ­ Operating Expenses= Expense of running business but not related to producing  the goods being sold, Overhead, Admin expense, Salaries, Marketing cost  ­ Operating Income= Gross profit ­ Operating expense  ­ EPS= Earnings Per Share  ­ Net Income / Shares Outstanding  ­ Stock Options= Right to buy shares by specific date at specific price  ­ Convertible Bonds= Form of debt that can be converted into shares of common  stock  ­ Dilution= When more shares appear to divide the same earnings  ­ Diluted EPS= Shows earnings per share company would have if stock options  were exercised  ­ EBITDA= Firms earnings before interest, taxes, depreciation, and amortization  ­ Statement of Cash Flows= Utilizes information from income statement and balance  sheet to determine how much cash firm has generated and how cash has been allocated  ­ Operating Activities= Start with net income then add all non­cash entries  ­ Deduct when A/R increases  ­ Add when A/P increases  ­ Deduct when inventory increases  ­ Add depreciation to net income before calculating operating cash flow  ­ Investment Activities= Lists cash used on investment  ­ Capital Expenditures= Purchase of new property, plant, and equipment  ­ Financing Activities= Show flow of cash between firm and its investors  ­ Retained Earnings= Net Income ­ Dividends  ­ Payout Ratio= Dividends / Net Income  ­ Record any sale or buyback of its own stock  ­ Financial Statement Analysis  ­ Gross Margin= How profitable is the firm looking at GP, Largest margin of all  ­ Gross Profit / Sales  ­ Operating Margin= How profitable is the firm looking at OI  ­ Operating Income / Sales  ­ Net Profit Margin= How profitable is the firm looking at NI, Smallest margin of all  ­ Net Income / Sales  ­ Asset Efficiency Ratio= How good is firm generating sales with assets  ­ Asset Turnover= How efficient is firm generating sales with its total asset  ­ Sales / Total Assets  ­ FIxed Asset Turnover= How efficient is firm generating sales with its fixed  asset  ­ Sales / Fixed Assets  ­ Return Ratios  ­ Return on Asset  ­ Net Income / Total Assets  ­ Return on Equity  ­ Net Income / Book Value of Equity  ­ DuPont Identity= Break down ROE   ­ Multiply Sales/Sales and Total Assets/Total Assets  ­ Net Profit Margin * Asset Turnover * Equity Multiplier= ROE  ­ Equity Multiplier= Total Assets / Total Equity    Chapter 3:Time Value of Money: An Introduction  ­ Competitive Market= Market in which good be bought and sold at same price 


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