Finance Bay Six
Name 3 different types of business organization.
Sole proprietorships, Partnerships, LLCs, S-Corporations, C-Corporations
What is the accounting equation?
Assets = Equity + Liabilities
Current assets - current liabilities
resources "tied up in business operations"
What is working capital?
If R = 10%, what's PV of a financial contract paying $2020 in a year?
$2000
The amount of money the owner of an asset would be paid after selling it and any debts associated with the asset were paid off.
Equity
Name 3 types of Current Assets.
Cash, Inventory, Accounts Receivable, Prepaid Expenses
Name one type of short-term liability.
Accounts payable, accrued expenses, unearned revenue
What's the equation for calculating the value of $10,000 invested for 8 years at a compounding rate of 6% per year?
FV = 10000*1.06^8
Name 3 financial statements.
Balance Sheet, Income Statement (a.k.a. Profit & Loss Statement), Cash Flow Statement, Statement of Retained Earnings
How do you calculate depreciation tax shields?
Depreciation Tax Shield = Tax Rate * Depreciation
This item represents a non cash item on the financial statement that you have to account for in arriving at net cash flow.
Depreciation
The ability of a company to convert assets—real or financial—into cash quickly without suffering a financial loss
What is Liquidity?
Costs that arise from incurring and preventing conflicts of interest between a firm’s owners and its managers
Agency costs
What is the Statement of Cash Flows?
Shows cash inflows and outflows for operating, investing and financing activities.
If inventory levels drastically increase, while while all other current assets and liabilities remain the same--does FCF increase, decrease, or stay the same?
Decrease in FCF
If this "return" measure is used as a discount rate, it makes the net present value of a project or investment equal to 0.