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58 Cards in this Set

  • Front
  • Back
working capital management
management of short-term assets and liabilities
operating cycle
from the time a company purchases raw material and provides labor for production to the time it collects payment for its final products
cash conversion cycle
the length of time between the payment of cash for inventory and the receipt of cash from accounts receivable
carrying costs
capital costs, warehousing, insurance, bad credit
*increase w/ higher levels of current assets-easy to measure
shortage costs
stock outs, sales
*decrease with higher levels of current assets, tough to measure
old paradigm
working capital is good excess inventory adds value to customers
new paradigm
working capital is bad, reflects poor planning and use of funds, reduce inventory by changing processes and working with suppliers
capital budgeting
the process of planning and managing a firm's long-term investments
cost of capital
cost of obtaining financing for the company's capital expenditures
payback period
amount of time required for an investment to generate enough cash flow to recover its initial cost
capital structure
the mix of long-term debt and equity issued by the firm
main regulator of all primary and secondary market activity in the us
venture capital
equity investments by investors in private companies
seed financing
first money provide by centure capitalists and involves an initial investment of up to several mil dollars
first round funding
investment in private companies that have tangible products that are nearly developed and will soon be marketed
intermediate funding
maturing company where a future leveraged buyout, merger, or acquisition and/or initial public offering is a viable option
later stage funding
mature company where fund are needed to support major expansion or new product development, company is profitable or breakeven
equity loan
offer of an ownership position to induce the loan or can be a note that has an option to convert from debt to equity
mezzanine funding
company's progress makes positioning for an IPO viable
initial public offering
exit stage of financing when a firm goes from private ownership to public ownership, initial public sale of common stock to investors
primary securities market
involves the sale of newly issued securities to investors
seasoned offerings (secondary)
subsequent sales of common stock to investors
underpricing effect
abnormal one-day return for IPOs, offering price is below the level where supply meets short-term demand
when an investment bank purchases newly issued securities from a company and guarantees a fixed price
when two or more firms agree to combine the separate companies into a single entity
when two or more firms combine and form a new firm separate from the previous firms
when an attempt to acquire a company is resisted by the target
secondary securities market
markets where the funds flow from the buyer of a security to the seller-not to the issuer of the security
stock exchanges
organizations where stocks are traded by the members of the exchange
new york stock exchange, largest stock exchange in the world due to market cap, auction market, specialists act as dealers or brokers, most liquid
members of the exchange who are selected to specialize in the buying and selling of shares of one or more specific stocks
specialist acts as an agent for another member and executes transactions for other floor brokers in exchange for a commission
specialist acts on his own behalf and will buy and sell out of his own account
over the counter market
no physical trading floor and no specialists, over telephones and computers
national association of securities dealers automated quotation system, provides market participants with price quotations for securities traded in the otc market
market makers
individual dealers who commit capital and openly compete with one another for investors' buy and sell orders
electronic communication networks
ecn, trading systems which bring additional customer orders into nasdaq
the price a dealer is willing to pay to purchase a security
price a dealer is willing to accept to sell a security
price-weighted index
adding all of the prices of the stocks in the index and divide that sum by a divisor
Dow Jones industrial average
most popular price-weighted index, thirty stocks
market value-weighted index
percentage weight of each firm is dependent on the relative market value of the firm's stock divided by the stock market value of all the firms in the index
standard and poor's 500 index
market value-weighted index, 500 stocks from all major sectors across the three major us stock markets (nyse, amex, nasdaq)
financial intermediation
involves the creation and sale of secondary securities by financial institutions
secondary securities
include saving and checking accounts, annuities, insurance policies and pension plans, and mutual funds,
primary securities
stocks, bonds, loans, mortgages,
the interest, dividneds, principal, and gains pay the cash flows associated w/ secondary securities
maturity intermediation
FI pools and transforms the longer-term assets that it owns into the shorter-term ones that are owned by the FIs depositors
diversification intermediation and default risk
when investors pool their funds with a financial intermediary, the FI is able to take advantage of economies of scale and its expertise in analyzing default risk, and the individual investors pay much less for the same amount of diversification
economies of scale in information and costs
FIs are able to pool investment assets and provide the necessary information at a considerably lower cost than what would be available to an individual investor
depository financial intermediaries
commercial banks, savings and loan associations, savings banks, credit unions
contractual financial intermediaries
pension funds, life insurance companies, property and casualtiy insurance companies
transactional financial intermediaries
brokerage firms and investment banks, mutual funds and investment companies
process of going from a value today to an expected but unknown value in the future
future value
the amount of money that an investment will grow to at some future date by earning interest at a certain rate
compound interest
when an investment earns interest on both the original principal and the accumulated interest
simple interest
when an investment pays interest only on the original principal
present value
current value of future expected cash flows discounted at the appropriate discount rate
discount rate
rate used to calculate the present value of a future cash payment