• Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off
Reading...
Front

Card Range To Study

through

image

Play button

image

Play button

image

Progress

1/77

Click to flip

Use LEFT and RIGHT arrow keys to navigate between flashcards;

Use UP and DOWN arrow keys to flip the card;

H to show hint;

A reads text to speech;

77 Cards in this Set

  • Front
  • Back

How can the firm pay out residual cash flows?

To the owners as dividends or to reinvest it.



What are the three decisions a financial manager makes?

Capital Budgeting Decision (which assets to buy)


Financing Decision (how to finance or pay for assets)


Working Capital Decisions (How should day to day financial matters by managed)



The ____ prepares financial statements, oversees accounting, taxes, etc.

Controller

The _______ looks after the collection and distribution of cash.

Treasurer

The _______ is responsible for in depth risk assessments.

Internal Auditor

The ______ provides an independent audit.

External Auditor

The _______ approves the external auditors fees.

Audit Committee

_______ are not the same as cash flows.

Accounting profits.

Profit maximization ignores the _____

risk associated with cash flows

Goal of Financial Management?

To maximize the value of the stock. To maximize the value of the owner's equity (in private corp)

Direct Financial markets - the minimum transaction is > _____ and done through investment banks.

1 million

______ is a basic investment banking service to assist firms in the sale of debt or equity.

Underwriting

Primary Market - the market selling new security issues when?

The first time

Liquidity - when an asset can be easily converted into cash without ________________

loss of value

Dealers buy and sell -

from their own inventory and have risk

Money markets (wholesale global markets) are highly marketable and deal with ________ maturities.

short term

Capital markets deal with ___________ debt

long term

Futures and Options markets are often called

derivative securities

short term IOU's are also called

commercial papers

Interest rate determined in the absence of inflation -

real rate of interest

Stakeholder Perspectives

stockholder


manager


creditor



Manger gets feedback on investing, financing, and working capital decisions by identifying ______.

trends

Creditors monitor ___________ and ___________.

debt and short term obligactions

Use only ______________ financial statements.

audited

Each asset and liability item on balance sheet is standardized by dividing by ____

total assets

Each income statement item standardized by dividing it by dollar amount of ______

net sales

Liquidity rations : higher number = ___________

more liability

Inventory subtracted from total current assets determines _________

most liquid assets

Efficiency ratios measure how efficiently firm's management uses ___________________

assets to generate sales

Too high or too low of an inventory turnover can be a ____________________

warning sign

Days sales in inventory measures the number of days firm takes to ________________

turn over inventory

The smaller the number of the days sales ratio, the more ___________

efficient

The Days Sales Outstanding measures the number of days the firm takes to ______

convert receivables into cash

Leverage ratios reflect the ability of firm and owners to use equity to _____

generate borrowed funds

Financial leverage refers to the use of debt in the firm's ___________

capital structure

Net profit margin measures amount of ______

net income after taxes

P/E ratio reflects investor's expectations of ____________

future earnings

In DuPont, the set of related ratios link __________ and ____________________

balance sheet and income statements

Weak operations efficiency calls for a closer look at the firm's _______________

income statement items

Asset turnover or leverage problems shift focus to ________________

balance statement

ROE (return on equity) is based on after-tax earnings - not ______

cash flows

ROE does not consider __________

risk

What three ways do financial managers use to create a benchmark for comparison?

time trend


industry average


peer groups

Ratio analysis depends on accounting data based on ____________

historical costs

Time trend analysis could be distorted by financial statements affected by ______

inflation

Any price balancing overall supply and demand for a security is ________________

market equilibrium price

A security's true value is a price reflecting investors' estimates of value of expected ____________

future cash flows

Operational efficiency focuses on bringing buyers and sellers together at lowest ___________

possible cost

Semi-strong market efficiency implies that only __________ information available to all investors is reflected in the market price

public

Corporate bonds are ____________ that represent claims against a firm's assets.

long term IOU's

Debt instruments where the interest income paid to investors is fixed for the life of the contract are ________________ securities.

fixed income

Vanilla bonds have _________________ fixed for the life of the bond and have a maturity period

coupon payments

Convertible bonds are bonds that can be converted into _____________ at a predetermined ratio.

shares of common stock

If a bond's coupon rate is equal to market rate, bond will sell at a price equal to its face value - these are called _____ bonds

par

If the coupon rate is less than the market rate, they are called _____________ bonds.

discount

For a given change in interest rates, prices of long term bonds will change _________ than prices of short term bonds.

more

Long term bonds have greater ___________.

price volatility

For a change in _____________, low coupon bonds change more than high coupon bonds.

interest rates

Marketability refers to investor's ability to sell a security quickly at a low transaction cost, and at its fair _____________.

market value

Call provision gives the firm issuing bonds the option to purchase the bond from an investor at a predetermined rate or _______________.

call price

Two most prominent credit rating agencies are ___________

Standard and Poors & Moody's

Highest rate bonds with the lowest default risk are rated ____________

AAA

Term structure is the relationship between __________ and term to maturity.

yield

Ascending or normal yield curves are upward sloping curves that occur when economy is __________

growing

What three economic factors shape the yield curve?

real rate of interest


expected rate of return


interest rate risk

The longer the __________ of a security, the greater its interest rate risk.

maturity

Common stock represents ____ in a corporation.

ownership claim

Owners of common stock are not guaranteed any _____________

dividend payments

Even though preferred stock is equity, owners have no ________________

voting privileges

Brokers cannot guarantee an order will be _____________

executed promptly (Dealers can because they have an inventory of securities)

In contrast to coupon payments on bonds, size and timing of dividend cash flows are ________

less certain

From an investor's perspective, secondary markets provide ________ at a fair price for shares of securities they own.

marketability

Active secondary market enables firms to sell their new debt or equity issues at lower ____________

funding costs

Each secondary market differs according to amount of ____ information available to investors.

price

In _______ stock prices change constantly as new information becomes available.

efficient markets

Growth stocks are those of companies whose earnings are growing at ______________ rate.

an above average

Constant dividend growth is an appropriate assumption for ______________ with history of stable growth.

mature companies