Financial Foundations
What are Investments?
One of the three major divisions of finance that focuses on growing wealth over time through stocks and bonds.
What is the Balance Sheet?
This financial statement shows assets, liabilities, and equity at a specific point in time.
What is the Current Ratio?
Current Assets divided by Current Liabilities.
What is Return?
The gain received from an investment.
What is Financial Leverage?
The use of borrowed funds to finance purchases or business activities.
What is an Asset?
Anything owned that has value.
What is Equity?
Assets equal liabilities plus this.
What is the Quick Ratio?
The liquidity ratio that excludes inventory.
What is Risk?
The uncertainty that expected returns will not be achieved.
What is Return on Equity (ROE)?
Net Income divided by Average Equity.
What is a Liability?
Money owed to others.
What is the Income Statement?
This statement reports revenues, expenses, and net income over a period.
What is Inventory Turnover?
Sales divided by Average Inventory.
What are income and price appreciation?
The two primary sources of investment return.
What is Times Interest Earned (TIE)?
EBIT divided by Interest Expense.
What is maximizing shareholder value?
The goal of financial management.
What is the Statement of Cash Flows?
The statement that reports operating, investing, and financing cash activities.
What is Days Sales Outstanding (DSO)?
Average Accounts Receivable divided by Sales per Day.
What is Risk?
Generally, higher expected returns are associated with higher levels of thi
What is Net Margin?
Net Income divided by Sales.
What are Financial Institutions, Investments, and Corporate Finance?
The three major divisions of finance.
What is $100,000?
A company has assets of $250,000 and liabilities of $150,000. Calculate equity.
What is 2.0?
A firm has current assets of $150,000 and current liabilities of $75,000. Compute the current ratio.
What are Assumptions?
Expectations used when making financial calculations and plans.
What are Net Margin, Total Asset Turnover, and Equity Multiplier?
The three components of the DuPont Formula.