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26 Cards in this Set
- Front
- Back
Credit Default Swaps (CDS) |
Securities that were created by financial institutions as insurance against borrowers defaulting on their loans |
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Proper risk-return management means what? |
The firm must determine an appropriate trade-off between risk and return |
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Disadvantage of sole proprietorship |
Unlimited liability to owner |
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How does the partnership form of an organization deal with the taxation of earnings? |
Avoids the double taxation of earnings and dividends found in the corporate form of organization |
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Maximization of shareholders wealth is a concept that does what for a firm's wealth? |
Increases wealth of the company |
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What items are subtracted from sales at operating income? |
Operating Expenses (COGS and Selling and Administrative Expenses) |
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Gross Profit Equation |
Sales - COGS |
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Operating Income Equation |
GP - Operating Expenses |
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Earnings per Share is what? |
A market prospect ratio that measures the amount of net income earned per share of stock outstanding OR The amount of money each share of stock would receive if all of the profits were distributed to the outstanding shares at the end of the year OR A calculation that shows how profitable a company is on a shareholder basis |
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Ratio analysis can be useful for what? |
Used to evaluate operating performance of firm OR Compares performance record against similar firms in industry OR Additional evaluation of company management, physical facilities, and other factors |
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Asset utilization ratio measures speed at which firm turns over... |
1) Accounts Receivable 2) Inventory 3) Long Term Assets |
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Asset utilization ratio relates what to what? |
Balance sheet (Assets) to Income Statement (Sales) |
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A decrease average collection period could be associated with what? |
Decrease in Accounts Receivable OR Increase in Sales |
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In using a systems approach to financial planning, it is necessary to develop what statements? |
1) Pro forma income statement 2) Pro forma balance sheet 3) Cash budget |
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Expected Value of the total sales production |
Expected Value = Probability x Total Value |
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Total Value Equation |
Total Value = Units x Price |
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Required Production Calculation |
Production Requirements = Projected Sales + Desired Ending Inventory - Beginning Inventory |
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The need for an increase or decrease in short-term borrowing can be predicted by what? |
A cash budget |
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What is net cash flow? |
Difference between monthly receipts and monthly payments |
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At the break-even point, a firm's profits are equal to what? |
Zero (Total Revenue = Total Costs) |
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Financial leverage deals with what? |
Amount of debt used in the capital structure of the firm |
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Lowest possible degree of operating leverage |
1 |
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Operating leverage deals with what side? |
Asset side |
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Lowest possible degree of financial leverage |
1 |
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Financial leverage deals with what side? |
Liability and Equity Side |
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In break-even analysis, the contribution margin is defined as what? |
Contribution Margin = Sales revenue - Variable expenses |