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10 Cards in this Set
- Front
- Back
Burn Rate
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Burn rate is usually quoted in terms of cash spent per month. For example, a burn rate of 1 million would mean the company is spending 1 million per month. When the burn rate begins to exceed forecasts, or revenue fails to meet expectations, the usual recourse is to reduce the burn rate (which, in most companies, means reducing staff).
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Capitalize
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In general, capitalizing expenses is beneficial as companies acquiring new assets with a long-term lifespan can spread out the cost over a specified period of time. Companies take expenses that they incur today and deduct them over the long term without an immediate negative affect against revenues.
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Closely Held
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A company whose common shares are owned by one individual owner or by a small group of controlling stockholders. This is in contrast to a widely held stock, in which thousands or even millions of different investors may own shares in a large company.
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Current Ratio
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Current Assets / Current Liabilties
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Du Pont Analysis
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DuPont analysis tells us that ROE is affected by three things:
- Operating efficiency, which is measured by profit margin - Asset use efficiency, which is measured by total asset turnover - Financial leverage, which is measured by the equity multiplier ROE = Profit Margin (Profit/Sales) * Total Asset Turnover (Sales/Assets) * Equity Multiplier (Assets/Equity) It is believed that measuring assets at gross book value removes the incentive to avoid investing in new assets. New asset avoidance can occur as financial accounting depreciation methods artificially produce lower ROEs in the initial years that an asset is placed into service. If ROE is unsatisfactory, the DuPont analysis helps locate the part of the business that is underperforming. |
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Ex-Dividend
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A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be given ex-dividend status if a person has been confirmed by the company to receive the dividend payment.
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Fiduciary
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A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets for the benefit of the other person rather than for his or her own profit.
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Fungibility
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Many diverse types of assets are considered to be fungible. For example, specific grades of commodities, such as No.2 yellow corn, are fungible because it does not matter where the corn was grown - all corn designated as No.2 yellow corn is worth the same amount.
Cross-listed stocks are considered fungible as well because it doesn't matter if you purchased a share of XYZ stock in its home country or in a foreign country; it should be accepted at either location as XYZ stock. |
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Profit Center
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The branch or division of a company that creates profits individually and separately from the main organization.
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Working Capital
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Current Assets - Current Liabilities
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