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79 terms

Finance Test #2

STUDY
PLAY
common
type of stock that is defined by the fact that it receives no preferential treatment in respect to either dividends or bankruptcy proceedings
proxy voting
you cannot attend the shareholders meeting so you authorize another shareholder to vote on your behalf. granting this authority is called
dividends
distributions to shareholders by a corporation
preferred
type of equity security that has a fixed dividend and a priority status over other equity securities
primary
NASDAQ
secondary
this market is best defined by being the market where outstanding shares of stock are resold
dealer
an agent who maintains an inventory from which he or she buys and sells securities is called
broker
an agent who arranges a transaction between a buyer and a seller of equity securities is called a
member
the owner of one of the 1,366 trading licenses for the NYSE is called a
commission broker
the person on the floor of the NYSE who executes buy and sell orders on behalf of the customers is called
specialist
a market maker who acts as a dealer in one or more securities on the floor of the NYSE is called a
floor broker
a - - on the NYSE executes orders on behalf of a commission broker
floor trader
an individual on the floor of the NYSE who owns a trading license and buys and sells for his or her personal account
SuperDOT
electronic system used by the NYSE for directly transmitting orders to specialists
order flow
the stream of customer orders coming in to the NYSE trading floor is called
post
the counter area on the floor of the NYSE where a specialist operates is called
OTC
a securities market primarily comprised of dealers who buy and sell for their own inventories is referred to as which type of market
ECN
a website that allows individual investors to trade directly with one another
corporate shareholders
-- may receive a tax break on a portion of their dividend income
cumulative preferred shares
- - - are more valuable then comparable non-cumulative shares
commission
- brokers work on behalf of brokerage firm clients
shareholders
who owns the NYSE
floor broker
player on the floor of the NYSE can be linked to part-time help because they are called to duty only when others are fully employed
NASDAQ
- is comprised of three separate markets
balance sheet
financial statement that shows the accounting value of a firms equity as of a particular date
Net working capital
= current assets - current liabilities
income statement
financial statement tht summarizes a firms revenues and expenses over a period of time
noncash
- items refers to expenses which do not directly affect cash flows
marginal
the % of the next dollar you earn that must be paid in taxed is the - tax rate
average
the - tax rate is equal to total taxes divided by total taxable income
cash flow from assets
the cash flow of a firm which is available for distribution to the firms creditors and stockholders is called the:
operating cash flow
the term that relates to the cash flow which results from a firms ongoing, normal business activities
free cash flow
cash flow from assets
cash flow to creditors
the cash flow related to interest payments less any net new borrowing is called
cash flow to stockholders
- - - - is defined as the dividend payment less net new equity raised
trademark
classified as an intangible fixed asset
current assets
inventory and cash are - assets
reputation
- is included in a firms market value but excluded from a firms accounting value
current liabilities
note payable to a supplier in 8 months
a/p to a supplier thats due next week
increase
selling inventory at a profit would - the value of a firms net working capital
decrease
a - in the cash balance would decrease net working capital
increase
net working capital - when inventory is sold for cash at a profit
accounts receivable
the most liquid account:
inventory
building
accounts receivable
equipment
land
liquid assets
- - are valuable to a firm
shareholder's equity
- - represents the residual value of a firm
higher
the higher the degree of financial leverage employed by a firm, the - the probability that the firm will encounter financial distress
book value
the - - of a firm is based on historical cost
market value
the - - of a firm
value of management skills, value of firms rep, value of employees experience
GAAP
according the the -, costs of goods sold are recorded based on the matching principal
office salaries
which is most apt to fixed cost?
raw mat
manu wages
mgmt bonuses
office salaries
depreciation
most apt to fixed cost:
product labor cost
depreciation
r/m
utilities
sales commissions
interest expense and depreciation
expenses for accounting purposes
product
the labor costs for producing a product are expensed when the - is sold
marginal tax rate
the - - - for a firm can be either higher or lower than the average tax rate
incremental
a firms tax rate is computed on an - basis
depreciation
- reduces both taxes and net income
income statement
on a - - taxes reduce both net income and operating cash flow
increase, increase
an - in depreciation will - the operating cash flow
decrease in net capital spending
what will increase the cash flow from assets
depreciation
for a tax-paying firm, an increase in - will cause the cash flow from assets to increase
negative cash flow
the firm utilized outside funding would be true if a firm has - - - from assets
increase
a - in depreciation expense will cause: decrease net income, increase the cash flow from assets
interest expense
not included in cash flow from assets:
a/p
inventory
sales
interest expense
cash account
net capital spending
- - - is equal to zero if the decrease in the net fixed assets is equal to the depreciation expense
positive
a - cash flow to creditors represents a net cash outflow from the firm
positive
a - cash flow to stockholders indicates that the dividends paid exceed the net new equity raised
uses of cash
activities of a firm which require the spending of cash are known as
statement of cash flow
the sources and uses of cash over a stated period of time are reflected on the
sales
a common-size income statement is an accounting statement that expresses all of a firms expenses as a percentage of
common-base year statement
standardizes items on the income statement and balance sheet relative to their values as of a common point in time
financial ratio
relationships determined from a firm's financial information and used for comparison purposes are known as:
Du Point identity
formula which breaks down the return on equity into three component parts is
increase in a/p
which is a source of cash?
increase in a/r
increase in a/p
increase in inventory
decrease in common stock
use of cash:
increase in n/p
decrease in inv
dec in a/r
dec in common stock
cash
acquisition of debt is a source of
financing
increase in long-term debt & dividends paid are considered - activities
cogs, decrease in a/p, interest paid
which is considered operating activities:
cogs
decrease in a/p
interest paid
dividends paid
increase, operating
according to the statement of cash flows, a decrease in a/r will - the cash flow from - activities
decrease, operating
according to the statement of cf, increase in interest expense will - the cf from activities