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57 Cards in this Set

  • Front
  • Back
Computed as a periodic return minus the average return
Derived by summing the squared deviations and dividing by n-1
Square root of the variance
Standard Deviation
Measures the risk per unit of return
Coefficient of Variation
Expected or Forecasted return and risk
Market in which prices adjust quickly after the arrival of new information and the price change reflects the economic value of the information, on average.
Efficient market
Prices appear to fluctuate randomly over time, driven by the random arrival of new information.
Random Walk
Market in which prices reflect all public and private knowledge, including past and current information.
Strong-form efficient market
Market in which all public information, both current and past, is reflected in asset prices.
Semi-strong form efficient market
Market in which prices reflect all past information.
Weak-form efficient market
Study graphs of past price movements, volume, etc., to try to predict future prices.
Charists (technicians)
Any combination of financial assets or investments.
Occurs when we invest in several different assets rather than just a single one.
Two time series tend to move in opposite directions.
Negative correlation
Two time series tend to move in conjunction with each other.
Positive correlation
Statistical concept that relates movements in one set of returns to movements in another set over time.
Risk that can be diversified away.
Unsystematic Risk
Risk that cannot be eliminated through diversification.
Systematic Risk (Market Risk)
Portfolio that contains all risky assets.
Market Portfolio
States that expected return on an asset depends on its level of systematic risk.
Capital Asset Pricing Model (CAPM)
Measure of an asset's systematic risk.
Financial technique that involves dividing various financial statment numbers into one another
ratio analysis
Used to evaluate a firm's performance over time.
Trend or time series analysis
Different firms are compared at the same point in time.
Cross-Sectional Analysis
Compares a firm's ratios against average ratios for other companies in the industry.
Industry comparative analysis
Indicate the ability of the firm to meet short-term obligations as they come due.
Liquidity ratios
Dollar amount of a firm's current assets minus current liabilities.
Net working capital
Indicate extent to which assets are used to support sales.
Asset management ratios
Indicates the extent to which borrowed funds are used to finance assets, as well as the ability of a firm to meet its debt payment obligations.
Financial leverage ratios
Periodic bond principal repayments to a trustee
Sinking fund payments
Periodic bond principal repayments to a trustee
Sinking fund payments
Indicate the firm's ability to generate returns on its sales, assets, and equity
Profitability ratios
Indicate the value of a firm in the market place relative to financial statement values.
Market value ratios
Technique of breaking down return on total assets and return on equity into their component parts.
Du Pont analysis
Financial plans utilized in sales forecasts
Used by managers for financial planning to estimate the firm's operating profits at different levels of unit sales.
Cost-volume-profit analysis
Used to estimate how many units of product must be sold in order for the firm to break even or have a zero profit.
Break-even analysis
Contribution of each unit sold that goes toward paying fixed costs.
Contribution margin
Measures the sensitivity of operating income to changes in the level of output.
Degree of operating leverage (DOL)
Time between ordering materials and collecting cash from receivables.
Operating cycle
Time between a firm's paying its suppliers for inventory and collecting cash from customers on a sale of the finished product.
Cash conversion cycle
Tool the treasurer uses to forecast future cash flows and estimate future short-term borrowing needs.
Cash budget
Demand for cash needed to conduct day-to-day operations.
Transactions motive
Holding funds to meet unexpected demands.
Precautionary motives
Holding funds to take advantage of unusual cash discounts for needed materials.
Speculative motives
The delay in the payment system between when funds are sent by a payer and credited to the payee's bank account and deducted from the payer's bank account.
Payments are sent to a P.O. box and processed by a bank to reduce collection float.
Regular (typically monthly) deductions by a vendor from a customer's checking account.
Pre-authorized checks
An arrangement between a bank and firm to transfer sufficient funds to a disbursement account to cover the day's checks presented to the bank for payment.
Zero-balance account
The use of communications and computer systems to convey ordering, invoice, and payment information between suppliers and customers.
Electronic Data Interchange
Ethical quality upon which one can base a judgement about a customer's willingness to pay.
Ability to pay bills.
Adequacy of owners' equity relative to existing liabilities.
Whether assets are available to provide security for the potential credit.
Current economic climate and state of the business cycle.
Source of credit information about business firms and individuals.
Credit bureaus
Credit extended on purchases to a firm's customers.
Trade credit