TVM
The amount of money an investment will grow to over some period of time at some given interest rate
Future Value
The basic accounting equation is?
Assets = Liabilities + Owners Equity
Types of ratios that measure the ability of a firm to cover its short term obligations
Liquidity ratios
A snapshot of the firms accounting value at a specific point in time
Balance Sheet
The term used to describe Revenue - Expenses
The excel formula, or the Financial Calculator button that is used to represent the number of periods in a TVM equation
=NPER ; N
The firm deciding which ling term investments it should make?
Capitol Budgeting
This ratio would be less than one if a firm has more current liabilities then current assets.
Assets that will be converted into cash within the next year
Current Assets
In early August of 2018 this U.S based company was the first to hit one TRILLION dollars in Market cap in the history of the Stock Market
Apple
That is more than the entire GDP of 179 of 195 countries in the world
A useful approximation for the number of years required to double an investment
Rule of 72 ; # years = 72 / interest rate
A firm deciding how to raise the funds for selected investments
Capitol Structure
Net income divided by sales is equal to what?
Profit Margin
An expense, that will decrease a firms overall taxable income, that accounts for the loss in value of a firms assets
Deprecation
This oil company based out of Houston Texas went bankrupt due on December 2, 2001 to falsifying financial statements. Its crash led to the dissolution of Aurther Anderson, of the the worlds largest accounting firms, and to the Sarbanes Oxley act
Enron
at the time was the largest bankruptcy in the world with 63 billion dollars in assets.
The amount of money that you need to have today to meet a financial obligation in the future
Present Value
The ultimate goal of a financial institution
to maximize shareholder wealth
This ratio, which is the number one indicator of a firms success in the eyes of many wall street investors, depicts the total income a firm had in relation to the shares is has outstanding
Earnings Per Share, EPS
The cash flow available to the investors after the firm has made investments in fixed assets and working capital.
Free Cash Flow
In September 2008 the 5 largest investment bank in the U.S filed for chapter 11 bankruptcy and broke Enrons record as the largest filing. At the time this company had 639 Billion dollars in assets, many of which here sub prime mortgages which had become virtually worthless after the collapse of the housing bubble.
Lehman Brothers
If you won the lottery for $1,000,000 dollars and had the opportunity to receive a lump sum of $600,000 today or $2,500 a month for the next 20 years, which one should you choose?
$600,000 today because the TVM states that a dollar today is worth more than a dollar in one year
2500 x 12 months x 20 years = 600,000 , the sum received total would be the same but because of TVM it is worth more to you today.
Agency Problem
Du Point Identity
A term that can be used to describe the rate of return of an asset and a firms ability to meet short term obligations
Liquidity
Often admired as the greatest investor Wall Street has ever seen, as well as the founder of Berkshire Hathaway this man who is from Omaha Nebraska is currently worth 84 billion dollars and is one of the richest people in the world.
Warren Buffet