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21 Cards in this Set
- Front
- Back
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Major Areas of Finance
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Financial management, financial markets and institutions, investments
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Focus of Financial Professionals
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Cash flow and market value based on the amount, the timing, the risk and the uncertainty
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Agency Issues
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Conflicts between owners and managers, conflicts between principals and agents, managers may have interest that conflict with those of the owners
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Capital Budgeting
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Deals with the firm's investment in long-term assets
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Capital Structure
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Deals with long-term financing of the firm's activities
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Working Capital Management
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Deals with management of short-term (current) assets
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Rate of Return Vs. Cost of Capital
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The bigger the return, the higher the cost. The lower the return, the lower the cost
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T-Bills
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Short term securities issued by the federal government
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Certificates of Deposits
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Interest bearing securities issued by financial institutions
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Commercial Paper
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Unsecured debt issued by corporations with good credit ratings
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Euro Dollars
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Dollar denominated deposits located in non US banks
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Bankers Acceptances
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Debt securities that have been guaranteed by a bank
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Capital Market Securities
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Trades long term securities (bonds, stocks)
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Nominal Risk Free Rate
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the real rate of interest plus the expected inflation
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Format of Income Statement
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Revenues-Expenses=Net Income
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Accounting Formula (Balance Sheet)
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Assets=Liabilities+Owners Equity
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Statement of Cash Flows
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Cash inflows-cash outflows=change in cash
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Market Value vs. Book Value
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Factors that determine the disparity between market and book value: Time since acquisition (more time, more difference). Inflation (higher inflation, more difference). Tangible vs. Intangible assets (Intangible assets, more difference)
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Marginal Taxation
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Tax rate on the next dollar of income
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Average Taxation
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Taxes paid divided by taxable income
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Dividend Exclusion for Corporations
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70% exclusion
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