The Role of Managerial Finance & Financial Market Environment
Financial Statements and Ratio Analysis
Cash Flow and Financial Planning
Time Value of Money
Interest Rates and Bond Valuation
100
These are characteristics of this type of legal form of business:
1. One owner
2. Operates for his or her own profit
3. 73% of all businesses
4. Major drawback is unlimited liability (personally liable)
What is Sole proprietorship?
100
Provides a financial summary of the firm’s operating results
What is an income statement?
100
Allocation of historical cost over time
What is depreciation?
100
Refers to the observation that it is better to receive $ sooner than later
What is Time Value of Money?
100
Represents the cost of money and usually applies to debt instruments.
What are interest rates?
200
These are characteristics of this type of legal form of business:
1. Two or more owners
2. 7% of all businesses
3. Common in finance, insurance, real estate businesses
4. Established with written contract called articles of partnership
What are partnerships?
200
Presents a summary statement of the firm’s financial position at a given time
What is a balance sheet?
200
The three categories of a statement of cash flows
What are operating, investing, and financing activities?
200
The value at a given future date of an amount placed on deposit today and earning interest at a specified rate.
What is future value?
200
Simply stated is the cost of money in a perfect world in which there is no inflation, no liquidity preferences by investors, and no risk.
What is real rate of interest?
300
These are characteristics of this type of legal form of business:
1. Entity created by law
2. Legal powers of individual – can sue and be sued, make and be party to contracts, acquire property in its own name
3. 20% of all businesses
4. Account for 90% of all business revenues
5. Owners are stockholders
6. Limited liability – not personally liable for firm’s debt, losses limited to amount they invested when stock shares purchased
What are corporations?
300
Abbreviated form of the statement of stockholders equity
What is a Statement of Retained Earnings?
300
The formula for this is NOPAT + Depreciation
What is operating cash flow (OCF)?
300
The current dollar value of a future amount - the amount of money that would have to be invested today at a given interest rate over a specified period to equal the future amount.
What is present value?
300
The actual rate of interest charged by the supplier of funds and paid by the demander.
What is nominal interest rate?
400
These are the two major differences between accounting and finance.
What are emphasis on cash flows and decision making?
Accounting focuses on profit or loss. Finance managers focus on cash inflows and outflows.
400
Summary of cash flows over the period of concern
What is a statement of cash flows?
400
The formula for this is OCF – Net fixed asset investment (NFAI) – Net current asset investment (NCAI)
What is Free Cash Flow (FCF)?
400
An annuity for which the cash flow occurs at the end of each period.
What is an ordinary annuity?
400
Relationship between the maturity and rate of return for bonds with similar levels of risk.
What is term structure of interest rates?
500
Primary economic principle used in managerial finance
What is marginal-cost benefit analysis?
500
5 basic categories of ratios
What are liquidity, activity, debt, profitability, and market ratios?
500
Statement of firm’s planned inflows and outflows of cash
What is a cash budget?
500
An annuity for which the cash flow occurs at the beginning of each period.
What is an annuity due?
500
This curve can tell analysts how rates vary between short, medium and long term bonds, but may also provide information on where interest rates and the economy in general are headed in the future.