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finance comps
| Question | Answer |
|---|---|
| bonds | securities issued by corporations or governments |
| valuing bonds | a process of determining the fair market price of the bond based on factors such as interest rates, bond payments, and time periods. |
| measuring interest equation | the process of quantifying how much someone is engaged with a particular topic, activity, or product |
| interest | calculated as a percentage of the bond's face value |
| exchange rates | - the face value of one currency relative to another -affects international trade and investments |
| operating goal of publicly-owned firm | to maximize shareholder wealth ( max stock price) |
| time value of money | money today is worth more than the same amount in the future |
| PV, present value | value today of future cash flows |
| FV, future value | value in the future of current cash flows |
| beta | measure of a stock's volatility relative to the market |
| beta > 1 | stock is more volatile than the market |
| beta < 1 | stock is less volatile to the market |
| EPS, earnings per share | measures how much money a company makes for each share of its stock equation: net income / share outstanding |
| ROE, return on equity | measures profitability relative to shareholders equity equation: net income / shareholders equity |
| GM, gross margin | percent of revenue left after the cost of goods sold equation: (rev-cogs) / rev |
| NPV, net present value | different between present value of cash inflows and outflows NPV= ∑ (cash inflows / ( l + r ) to the t) - initial investment |
| IRR, initial rate of return | discount rate that makes NPV=0 |
| WACC, weighted average cost of capital | average rate a company pays for capital, weighted by proportion of debt and equity used |
| WACC equation | (WACC=(E/V times Re)+((D/V times Rd) times (1-T)) -equity -debt -v (total capital) -re (cost of equity) -rd (cost of debt) -tc= (tax rate) |
| systematic risk | market- wide risk (economic downturn) |
| unsystematic risk | company- specific risk (management change) |
| diversification | reduces unsystematic risk by combining different assets |
| capital structure | a mix of debts and equity a company uses to finance its operation & aims to optimize the cost and balance risk |
Created by:
lilymillsaps
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