For test chapter 1-3
Quiz yourself by thinking what should be in
each of the black spaces below before clicking
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| 6 steps of planning | predict need for funds source of funds tax management *relations with investors and creditors insureable risks inventory management
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| 4 steps of controlling | general accounting budgeting auditing establishing systems/ procedures
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| forms of ownership | sole proprietorship partnership corporation
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| which form of ownership generates the most money? | corporation
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| which form of ownership is most common? | sole proprietorship
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| Personnal guarentee by small business owner | "piercing the corporate veil"
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| To encourage business formation there are two other types of business | subchapter S & Limtied liability Company
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| Limtied liability compnay ( 6 facotrs) | Not asrestictive as S corps Members and governors Taxed as a corporation ( if retain earnings, no double tax) Non transferable ownership limited life no stock options
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| agency theory | relationship between managers and owners
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| Institutional investors | Stock mutual, pension funds, large % stock holding - professionaly managed
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| options for "non" effective managers | *fire them *proxy fights *threat of takeover *Stock options/ stock
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| 3 Goals of financial management | * Maintain or increase overall firm value * Maximize owners wealth in long run * socially responsible/ ethical activity
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| 3 ways to maintain or increase overall value of firm | * risk involved in operations * timing of earnings * quaility of reports- new SEC rule, CEOs and CFOs must certify results.
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| What are two markets for financial assets? | money "short term" securites mature under 1 year & Capital" long term" securites mature over 1 year
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| Money invloves | * T bills * Cds Commercial papers
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| Capital invloves | * stock- prefeered, common * bonds- govn't corp * Primary- oringinal issues IPO * secondary- buy previously owned securities
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| Finance | Managment of the flows of funds through the organization. also invloves providing capital & managing it efficiently & profitable
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| Factors of production | used to make goods to and services and to distribute them localy and globaly
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| Important things in finance | land labor capital entreprenuers knowledge
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| risk analysis | relative certanity of outcomes Optimistic- 15% Most likly- 65% Pessmistic- 20% = risk adjusted expected value
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| Pricing theory | compeditive strusture perfect compition, monopolistic, competion, oligolopy
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| comparative return | Section a vs. section b
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| Income statement | revenues - expenses
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| Balence sheet | Assest - Liabilities = Owner's equity
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| Cash Flow Statement | * operating avtivities * Investing activites * Financial activites
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| Ratio Analysis | *relationships between the amounts on the balence sheets and L. S. * Compare to other years * compare ot other companies
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| 1990's | Industrial revoltion * merges & acquuisitations created monopolies Rockfeller- oil carnagie- steel -vanderbitt- rail dupoint- chemical
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| 1920's | antitrust legislation strictly enforced sherman (1890) forbids combined resourses to restrict trade, attempt to create monopoly.
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| clayton act (1914) | illegal attempts to leason competition resulting in monopoly - exclusive deals - tieing contracts - interlock directorates
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| FTC (1914 | prohbit unfair methods of competition.
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| companies raised capital by offering... | Ownership shares- increase equity debt contracts (bonds)- increasing liability
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| 1923-1929 | roaring 20's, rapid expansion of business
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| 1930's | great depression * value of stock grew to fast * maintain liquidity * reorganized trouble firms * preserve capital * SEC disclosure (1934)
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| 1960's to present | better crash managemtn up collections down payments
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| Profit margin= | Net income / Sales
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| Return on assests = | Net Income / total Assets
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| Return on equity = | Net Income / Stock holders Equity or Return on assets / (1 - debt/assets)
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| Du point system of analysis | resturn on assets ( investment) = profit margin x Assest turnover
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| Receivable turnover = | Sales( credit) / Recivables
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| Average collection Period = | Accounts reciable / Average daily credit sales
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| Inventory Turnover = | Sales / Inventory
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| Fixed asset turnover = | Sales / Fixed Assets
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| Total Asset Turnover = | Sales / Total Assets
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| Current Ratio = | Current assets / Current Liabilities
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| Quick Ratio = | Current assets - Inventory / Current liabilties
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| Debt to total assets = | Total Debt / Total Assets
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| Times interest Earned = | Income before interest and taxes / Interest
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| Fixed charge coverage = | Income before fixed charges and taxes / Fixed charges
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| Income before fixes charges and taxes = | Income before interest and taxes + Lease payments
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