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11 Cards in this Set
- Front
- Back
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What are the 3 equations for Degree of Combined Leverage?
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= (%of change in net income)/(% of change in sales)
=[Q(P-V)]/[Q(P-V)-FC-1] =DOL x DFL |
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Marginal vs Average Tax Rates (define and know)
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Mar- % paid on next dollar earned.
Avg- tax bill/ taxable income |
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What is common-size statement?
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A standardized financial statement presenting all items in percentage terms. Balance sheet items are shown as a percentage of assets and income statement items as a percentage of sales.
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5 Categories of financial ratios..
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1. Liquidity ratios (short-term solvency)
2. Financial leverage ratios (long-term solvency) 3. Turnover ratios (asset management) 4. Profitability ratios 5. Market value ratios |
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List 6 limitations to ratio analysis.
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1. Hard to compare against large firms that operate in multi-business (conglomerants).
2. Inflation distorts figures. 3. Seasonal factors 4. Window dressing techniques 5. Different account practices. 6. Hard to define a "good" of "bad" number |
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What is the Present Value equation?
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PV= FV(1+r)^-t
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What is the Future Value equation?
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FV=PV(1+r)^t
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What is the Interest Rate equation?
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R=[FV/PV]^(1/t)-1
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What is the Time Period equation?
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t=[ln(FV/PV0]/[ln(1+r)]
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Value of any investment is the _____ of all future cash flows.
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Present Value
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What's the most important variable in any investment...
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Time
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