General Finance
What is the Russell 3000 index?
An index that measures the performance of the largest 3000 U.S. companies.
What is cash flow?
Cash that flows into the firm minus cash that goes out of the firm.
What is the accounting formula
Assets = Equity + Liabilities
What does a soft landing mean in economic terms?
If the Fed can raise interest rates sufficiently to moderate economic growth and lower inflation without triggering a recession, this accomplishment is referred to as achieving a soft landing.
Which of these is not a stock exchange?
New York Stock Exchange, Hong Kong Stock Exchange, BAWSAQ, and Euronext.BAWSAQ
What are four valuation methods?
Public Comps
DCF
PE x EPS
LBO
DDM
Acquisition Comps
Merger Consequences
Sum of the Parts
If they can't get 3: (DCF, Public comps, LBO)
What are three current assets?
cash, cash equivalents, accounts receivable, stock inventory, marketable securities, pre-paid liabilities, other
In accounting, the term "ROI" is often used to describe the financial performance of an asset. What does it stand for?
Return on investment.
What S&P 500 stock has grown the most in 2024?
Bonus +200 (400 total): What percent has it increased YTD?
NVDA 82.14% (Can be within 3 percent +-3%) as of 4/26
What are corporate bonds?
Debt security issued by a company to raise capital.
What is Alpha?
Alpha measures the excess returns on an investment above the benchmark.
What are 3 major line items on each of the financial statements?
Income Statement: Revenue; Cost of Goods Sold; SG&A (Selling, General & Administrative Expenses); Operating Income; Pretax Income; Net Income
Balance Sheet: Cash; Accounts Receivable; Inventory; Plants, Property & Equipment (PP&E); Accounts Payable; Accrued Expenses; Debt; Shareholders’ Equity.
Cash Flow: Net Income; Depreciation & Amortization; Stock-Based Compensation; Changes in Operating Assets & Liabilities; Cash Flow From Operations; Capital Expenditures; Cash Flow From Investing; Sale/Purchase of Securities; Dividends Issued; Cash Flow From Financing; Total Cash Flow, Cash at end of the year
What is the phrase used for terms in accounting that don't abide by the conventional reporting standards used in businesses? What is an example of one?
Non-GAAP
Anything that has (excluding, adjusted)
Free Cash Flow
EBITDA, EBIT
Net income (with adjustments)
What is the current Federal Funds Rate Range? (+-.05%)
What is the difference between the primary and secondary stock markets?
The primary market is where securities are created, while the secondary market (stock market) is where those securities are traded by investors.
What is the CAPM formula and what does it calculate?
A financial model that calculates the expected rate of return for an asset or investment. (based on its systematic risk)
CAPM = Rf * Beta ( Rm-Rf )
What is PRO FORMA?
A term describing estimates of what the Balance Sheets and Income Statements will look like in the future.
What are three of the top five largest market cap companies?
MSFT, AAPL, NVDA, GOOG, AMZN
How often does CPI Data come out? What does CPI measure?
Monthly
It measures inflation through increases in day-to-day expesnses. (basket of G&S)
Out of these stocks, which one isn't in the HFG Portfolio: Waste Management, Nike, United Health Group, Mondolez, Exxon Mobile, Kinsale
Nike
How do you calculate WACC? What is it used for?
Cost of Equity * (% Equity) + Cost of Debt * (% Debt) * (1 – Tax Rate) + Cost of Preferred * (% Preferred).
Used as the discount rate for valuing a company or its investment opportunities.
Weight of Equity * Cost of Equity + Weight of debt * Cost of debt * (1-tax)
What happens in each statement when Inventory goes up by $10, assuming you pay for it with cash?
No changes to the Income Statement.
Cash Flow from operations -10, (and net change in cash)
Balance Sheet: Inventory +10, Cash -10
On the Cash Flow Statement, Inventory is an asset so that decreases your Cash Flow from Operations – it goes down by $10, as does the Net Change in Cash at the bottom. On the Balance Sheet under Assets, Inventory is up by $10 but Cash is down by $10, so the changes cancel out and Assets still equals Liabilities & Shareholders’ Equity.
What’s the formula for Equity Value?
Equity Value = Share Price x Number of Shares Outstanding
Equity Value = Enterprise value - Debt and Debt Equivalents - Non-Controlling Interests - Preferred Stock + Cash and Cash Equivalents
John Meynard Keynes has a famous quote regarding the long run in economics. What is it?
"In the long run we are all dead"
Explain why bond prices and yields move inversely.
The majority of bonds offer a fixed interest rate, which becomes more appealing when interest rates decrease, leading to increased demand and a rise in the bond's price.
On the other hand, if interest rates increase, investors will no longer favor the bond's lower fixed interest rate, causing its price to decrease.