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### 11 Cards in this Set

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 What are the 3 equations for Degree of Combined Leverage? = (%of change in net income)/(% of change in sales) =[Q(P-V)]/[Q(P-V)-FC-1] =DOL x DFL Marginal vs Average Tax Rates (define and know) Mar- % paid on next dollar earned. Avg- tax bill/ taxable income What is common-size statement? 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. 5 Categories of financial ratios.. 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 List 6 limitations to ratio analysis. 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 What is the Present Value equation? PV= FV(1+r)^-t What is the Future Value equation? FV=PV(1+r)^t What is the Interest Rate equation? R=[FV/PV]^(1/t)-1 What is the Time Period equation? t=[ln(FV/PV0]/[ln(1+r)] Value of any investment is the _____ of all future cash flows. Present Value What's the most important variable in any investment... Time