finance
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corporations.
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| The primary goal of a publicly�owned firm interested in serving its stockholders should be to: | show 🗑
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| Which one of the following actions is the best example of an agency problem? | show 🗑
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| The Board of Directors of Giant Towers, Inc. have decided to base the salary of its CEO entirely on the market share of the firm. Accordingly, | show 🗑
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| GM has decided to issue new stock to fund a new project. When the stock is issued it will be sold on the: | show 🗑
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| show | 17,000
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| Green Grass, Inc., has sales of $498,000, costs of $267,000, depreciation expense of $35,000, interest expense of $18,000, and a tax rate of 32 percent. If the firm paid out $58,000 in cash dividends, the addition to retained earnings is $ _____ . | show 🗑
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| show | 220,890
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| show | depreciation
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| show | Increase the cash flow from assets
Decrease in taxes
Decrease net income
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| Total Greens, Inc. has a profit margin of 9.5 percent, total asset turnover of 1.2, and ROE of 24.9 percent. The firm's debt−equity ratio is ______ times. (Round your answer to 2 decimal places. (e.g., 32.16)) | show 🗑
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| show | Quick ratio of 0.7 when the industry benchmark is 1.2
Current ratio of 1.2 when the industry benchmark is 1.6
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| A common-size income statement is created by dividing all the income statement items by ______; while a common-size balanace sheet is generated by dividing all the balance sheet items by ______. | show 🗑
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| The DuPont identity of return of equity (ROE) indicates that the ROE is a product of these following three aspects of financial management; ____, _____, and ______. | show 🗑
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| Basic Areas Of Finance | show 🗑
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| show | Work with financial assets such as stocks and bonds
Value of financial assets, risk versus return, and asset allocation
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| Companies that specialize in financial matters | show 🗑
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| show | corporate Finance
Financial institutions
Investments
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| What long-term investments or projects should the business take on? | show 🗑
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| How should we pay for our assets? Should we use debt or equity? | show 🗑
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| show | Working capital management
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| Three major forms in the United States | show 🗑
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| What are some Advantages of Sole Proprietorship | show 🗑
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| show | Limited to life of owner
Equity capital limited to owner’s personal wealth
Unlimited liability
Difficult to sell ownership interest
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| show | Business owned by two or more persons
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| show | Two or more owners
More capital available
Relatively easy to start
Income taxed once as personal income
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| What are some disadvantages of have a Partnership | show 🗑
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| Corporation | show 🗑
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| What are some advantages of having a Corporation | show 🗑
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| What are some disadvantages of having a corporation | show 🗑
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| What should be the goal of a corporation? | show 🗑
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| Sarbanes-Oxley Act | show 🗑
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| Principal hires an agent to represent its interests Stockholders (principals) hire managers (agents) to run the company | show 🗑
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| The conflict of interest between the principal and the agent is called. (Management goals and agency costs) | show 🗑
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| show | Managerial compensation
Incentives can be used to align management and stockholder interests
Incentives need to be carefully structured to insure that they achieve their goal
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| what is example of Corporate control | show 🗑
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| show | 1.Firm issues securities to raise cash.
2.Firm invests in assets.
3.Firm's operations generate cash flow
4.cash is paid to government other stack-holder may revive cash
5.Reinvested cash flows are plowed back into firm.
6.Cash ispaid out to inv I D
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| The mechanism by which unhappy stockholders can act to replace existing management | show 🗑
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| The term__________ ________ refers to the original sale of securities by governments and corporations. | show 🗑
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| show | Secondary markets
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| In what market transaction does the corporation is the seller, and the transaction raises money for the corporation. | show 🗑
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| what is it called when selling involves selling securities to the general public. | show 🗑
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| What is it where as a private placement is a negotiated sale involving a specific buyer. | show 🗑
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| show | 1. auction markets
2. dealer markets
3. NasDaQ
4. NYSE
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| A snapshot of the firm’s assets and liabilities at a given point in time | show 🗑
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| Left-hand side (or upper portion) In order of decreasing liquidity | show 🗑
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| Balance Sheet Identity | show 🗑
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| Current Assets minus Current Liabilities Usually positive for a healthy firm | show 🗑
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| without significant loss of value Valuable in avoiding financial distress | show 🗑
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| show | New working capital
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| Shareholders’ equity = Assets - Liabilities | show 🗑
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| show | Financial Leverage.
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| the balance sheet value of the assets, liabilities, and equity. | show 🗑
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| show | Market value
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| Market value and book value are often very different. Why? | show 🗑
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| show | the Market value
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| show | income
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| show | Recognize revenue when it is fully earned
Match expenses required to generate revenue to the period of recognition
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| show | Expenses charged against revenue that do not affect cash flow
Depreciation = most important
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| What does GAAP stand for | show 🗑
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| Time and Costs | show 🗑
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| show | Smoothing earnings
GAAP leaves “wiggle room”
Global standardization of accounting
GAAP versus IFRS
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| show | Publicly
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| These reports are usually filed electronically and can be searched at the SEC public site called | show 🗑
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| % tax paid on the next dollar earned | show 🗑
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| – total tax bill / taxable income | show 🗑
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| show | Cash Flow
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| show | Cash Flow from Assets (CFFA)
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| show | Operating cash flow (OCF)
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| All accounts = percent of total assets (%TA) | show 🗑
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| All line items = percent of sales or revenue (%SLS) | show 🗑
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| Standardized statements are useful for: | show 🗑
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| show | Financial Ratios
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| Short-term solvency, or liquid measures ratios are found on balance sheet | show 🗑
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| Long-term solvency measures | show 🗑
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| The measure of short-term liquidity. the unit of measurement is eith dollars or times. | show 🗑
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| Inventory test of how many times inventory is turn over | show 🗑
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| Cash divided by current liabilities is | show 🗑
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| takes into account all debts of all maturities to all creditors. | show 🗑
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| This ratio measures how well a company has its interest obligations covered | show 🗑
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| the basic measure of the firm's ability to generate cash form operations. | show 🗑
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| measure days in inventory and times | show 🗑
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| show | Receivables turnover and days sales in receivables
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| show | Total asset turnover
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| show | Profit margin
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| Is a measure of profit per dollar of assets. | show 🗑
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| show | Return on equity
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| show | Earnings per share
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| measures how much investors are willing to pay per dollar of current earnings | show 🗑
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| Price per share divided by sales per share usually used for new companies | show 🗑
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| compares the market value of the firm's investments to their cost | show 🗑
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| an estimate of the market value of the company's operating assets | show 🗑
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| show | EBITDA RATIO
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| show | the DuPont Identity
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| Internal and Sustainable Growth Payout and Retention Ratios | show 🗑
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| Cash dividends / Net income | show 🗑
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| show | Retention ratio
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| show | The Internal Growth Rate
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| show | The Sustainable Growth Rate
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| show | Profit margin – operating efficiency
Total asset turnover – asset use efficiency
Financial leverage – choice of optimal debt ratio
Dividend policy – choice of how much to pay to shareholders versus reinvesting in the firm
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| Problems with Financial Analysis | show 🗑
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Created by:
john.ovalles1