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29 Cards in this Set

  • Front
  • Back
  • 3rd side (hint)
Progressive Tax
tax system where the marginal rates rise as income rises
going up
Agency Problem
Management tends to act as if they own the firm even if they control a small number of shares
Commercial Paper
short-term debt obligations of high credit worthiness corps...for example - Exxon-Mobile
Systematic Risk
risks related to the overall economy or markets
Default Risk Premium
risk of non-payment of interest owed and/or principle of loan
Quick Ratio (Acid Test)
Current Assets - Inventories / Current Liabilities

Measured in "x" (ex: 2.1x)
Lower = Poor
Current Ratio
Current Assets / Current Liabilities

Measured in "x" (ex: 2.1x)
Lower = Poor
Inventory Turnover Ratio
Sales / Inventory

Measured in "x" (ex: 2.1x)
Lower = Poor
Days Sales Outstanding
Accounts Receivable / (Sales/365)

Measured in "days" (ex: 36.5 days)
Higher = Poor
Fixed Asset Turnover
Sales / Net Fixed Assets

Measured in "x" (ex: 2.1x)
Lower = Poor
Total Assets Turnover
Sales / Total Assets

Measured in "x" (ex: 2.1x)
Lower = Poor
Debt Asset Ratio
Total Debt / Total Asset

Measured in "%" (ex: 20.3%)
Higher = Poor
Profit Margin
EAT / Sales
Lower = Poor
Return On Assets

Measured in "%" (ex: 20.2%)
Lower = Poor
Return On Equity
EAT / Common Equity

Measured in "%" (ex: 20.2%)
Lower = Poor
Price Earnings Ratio
Mkt Val. of Common Share / Earnings Per Share
Lower = Poor
Earnings Per Share
EAT / # Shares Outstanding
Price to Book Val. Ratio
Mkt Price of Common Share / Book Val. for Share
Lower = Poor
Book Value Per Share
Common Equity / # of Shares Outstanding
Equity Multiplier
TA / Equity
Financial Leverage (debt)
2nd Du Pont System
ROA = (EAT / Sales) x (Sales / TA)
1st Du Pont System
ROE = ROA x TA/EQ (Equity Multiplier)
In 2nd Du Pont System
Profit Margin (Profitability)
In 2nd Du Pont System
Market Segmentation
Theory 1 of Yield Curve
1)Different Supply & Demand Relationship w/in various Segments
2)Different institutions doing business in the various segments of the yield curve
Liquidity Preference
Theory 2 of Yield Curve
- short-term is more liquid than long-term
- liquidity has value
- Short-term has a lower interest rate than long-term
Market Expectations (Interest Rate Approach)
Theory 3 of Yield Curve
- Long-term rates is an avg of the current actual one year rate and expected future one-year rates up to the long-term bond's maturity
Market Expectations (Inflation Rate Approach)
Theory 3 of Yield Curve
-Long-term rate is determined by the real-rate plus the premium for the expected future inflation plus any risk premiums
Measure of Efficiency
DSO, Sales/INV, Sales/NFA
what it is based on