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27 Cards in this Set

  • Front
  • Back
Sarbanes Oxley Act of 2002 (4)
1. no more self regulation: established Public Accounting Oversight Board
2. limits non-audit activities: allows consulting, but must be approved
3. audit committees (some directors of firm) have more requirements: whistle-blower, must have one accounting expert, audit committee (not management) chooses auditors

4. CEOs and CFOs must sign financials
5 factors for choosing the best form of business
1. personal liability
2. taking profits
3. how taxes paid
4. raising capital
5. control
short term uses of funds (3)
buy inventory
pay for operations (wages)
extend credit (accounts receivable)
short term sources (5)
1. trade credit (no cost)
2. line of credit (borrow from bank for a month or so)
3. secured loan (ex: car dealership floorplan)
4. FACTORING (take copies of invoice to factor, and factor will pay invoice from manufacturers) best for furniture and clothing
5. "commercial paper" (firms loaning $ to other firms)
long term uses of funds (4)
-buy fixed assets (PPE)
-Make an acquisition (buy another firm)
-change capital structure (issue bonds, use money to buy back some shares of stock)
long term sources (3)
-retained earnings
-debt (ex: leasing, bonds)
-equity (ex: venture capital, preferred stock: stock before sold to public)
angel investors
invest small amts of $ to get company going in return for shares
simple interest
1000 x interest rate = future
"present value" formula

and why is it important
F= P x (1+r)^t

convert everything to "now" time
Net Present Value Rule

and why is it important
-select project with biggest NPV

convert future inflows to present time, and subtract investment needed
Rule of 72
the number of years it takes to double a sum of money

doubling time = 72/interest rate
Annual Percentage Rate (APR)
interest rate on loans and saving accounts usually stated in this form with a certain frequency of compounding
Effective Annual Rate (EFF)
used to make interest rates comparable

EFF= FV at the end of the year per dollar - 1= (1.004)^12 - 1.
EFF= (1+ APR/m)^m -1
what happens to the price of "fixed income streams" when market rates fall?
it rises
key interest rates
1. 10 year treasury note: 5%
2. 6 month treasury bill: 4.9%
3. 6 month certificate of deposit: 4.5%
4. "tax exempt" (typical) shorting stocks: 4.22%
5. commerical paper: 3.87
6. "money market": 2.7
7. checking account interest= 1.25
risk premium
the extra interest that companies pay investors above the gov't interest rate.
total return
interest + appreciation
P/E Ratio
current stock price/ annual earnings per share
breakeven point
fixed cost/contribution
selling price-variable cost
revenue - expenses
net income
income (profit) - tax (corporate income tax)
double taxation:

the interst paid on bond is a ________. does it show up on income? therefore it is ____ _______________.
interest paid on
are dividends counted as expenses? what does this mean
no. so means taxed at corporate level
Assets = Liabilities + Equity
current assets (3)
1. accounts receivable
2. merchandise inventory
3. pre-paid expenses
owner's equity
1. paid in capital: additional $ invested by owners
2. retained earnings