Chatper 1
Goal of a corporation, how?
Maximize shareholder wealth,
Make decisions that maximizes the price of common stock
Financial statement that presents a firm's asset, liabilities and equity
Balance Sheet
Increase in Inventory, what happens to Cash Flow?
Cash outflow
You won a lottery and told you will receive $10,000 per year for 10 years. What is the equivalent of these cash flows now, assuming 5% interest rate?
PV of annuity
pmt = 10000
n = 10
r = 5%
The initial public offerings , primary market
Name two closing costs when buying a home
Origination fee, points, down payment, title, insurance fee etc
The results of subtracting cost of goods sold from sales
Gross Profit
CA - CL
A series of equial payments made for a specific number of periods
Annuity
If you were to get a loan to buy a car (worth $50000), interest rate 6% compounded monthly, and borrowing form 4 years, what is the monthly payment?
solving for PMT
PV = 50000
Nper = 48
r = 6%/12 = 0.5%
Agency Problem (Cost)
Conflict of interest between managers and shareholders
Earnings Before Interest and Tax (EBIT)
Gross profit - operating expenses (depreciation)
Earnings Per Shares
NI/Number of shares outstanding
What are we calculating if we want to know how much you need to invest today to have $1mil. 10 years later (r=5%)
FV / (1+r)^n
= 1000000/(1+0.05)^10
Difference between EAR and APR
EAR = (1+APR/m)^m
in which platform are we taking the exam?
Brightspace
Financiang activity of a firm affects EBIT (Operating Income): True vs False?
False
how to calculate credit card interest when average daily method is used?
Average daily balance/monthly APR
What is the worth of a single investment of $5000 today in 5 years, with 5% compound annually. What are we calculating for?
PV *(1+r)^n
What happens if you only make minimum payments on your credit card balance?
Keep paying interest and principle
You are going to get a loan to buy a condo, which is priced at $300,000. You are going to make annual payments at the end of each year for 20 years, with 7% interest. The yearly payments is going to be $28,317.88. What is the total amount of interest that you will be paying for 20 years?
Total payments: $28317.88 * 20 = $566,358
Interest (total): $566,358-300,000 = $266,358
In Statement of Cash Flow, issuing new bond appears under which section?
Financing activity
Issuing equity (increase in Equity), what happens to cash flow?
Cash inflow?
PV
PMT = 2000
nper = 360
r = 7%/12
how many cheat sheets allowed?
2, double sided