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109 terms

Bus M 520 Midterm 2012

This is the only one, so do a good job on it!
STUDY
PLAY
3 Aspects of Role of Financial Manager:
-Capital Budgeting
-Capital Structure
-Working Capital Management
Capital Budgeting
Firm's Needed Investment in New Assets
Capital Structure
Policy for Degree of Financial Leverage
Working Capital Management
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3 Forms of Business Organizations:
-Sole Proprietorship
-Partnership
-Corporation
Business Process for Public Companies
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Principal-Agent Problem
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Markets Types:
Primary, Secondary, Dealer, Auction
New RE =
Old RE + Net Income - Dividends
Tax Liability
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Average Tax Rate
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Marginal Tax Rate
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4 Items for Financial Plan
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Role of Financial Planning
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Pro-Forma Financial Statements:
-Percent-of-Sales Method
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Pro-Forma Financial Statements:
-Spontaneous vs. Non-Spontaneous Accounts
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Pro-Forma Financial Statements:
-Capacity
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Pro-Forma Financial Statements:
New RE =
Old RE + [Projected Sales x Net Margin x (1-Payout Ratio)]
Pro-Forma Financial Statements:
-External Financing Needed (EFN) or Discretionary Financing Needed (DFN) [Definition and Calculation]
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Capacity Usage Calculations
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4 Ways to Reduce EFN (aka DFN)
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3 Reasons Working Capital Management is Important
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2 Key Management Objectives for Short-Term Planning
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Operating Cycle
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Cash Cycle
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Inventory Period
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Accounts Receivable Period
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Accounts Payable Period
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Flexible Short-Term Financial Policy
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Restrictive Short-Term Financial Policy
-Size of Current Assets
-Carrying Costs vs. Shortage Costs
-Financing of Current Assets
-Temporary vs. Permanent Current Assets
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3 Major Considerations for Short-Term Borrowing Policies
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PV Lump Sum
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PV Annuity
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FV Lump Sum
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FV Annuity
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Annuity Due (Begin Mode)
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Regular Annuity (End Mode)
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Perpetuity
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Uneven Cash Flows (practice on calculator using cash flow CFj function and Nj function)
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Two Period Calculations (Switching from Lump Sums to Regular Payments and vice versa)
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Mortgage Balloon Payments
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Effective Annual Rate (EAR) (Can use calculator shortcut or equation to solve)
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Simple Interest (definition and calculation)
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Compound Interest (definition and calculation)
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Amortization (calculation)
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Assets =
Liabilities + Owners Equity
Working Capital =
Current Assets - Current Liabilities
Tax Bill =
Reference Tax Table Provided; Taxable Income x Tax Rate
Average Tax Rate =
Total Taxes Paid/Total Taxable Income
Marginal Tax Rate =
Reference Tax Table Provided; Rate of extra tax you would pay if you earned one more dollar
Current Ratio =
Current Assets/Current Liabilities
Quick Ratio =
(Current Assets - Inventory)/Current Liabilities
Average Collection Period =
Accounts Receivable/Daily Credit Sales
Accounts Receivable Turnover =
Credit Sales/Accounts Receivable
Inventory Turnover =
COGS/Inventory
Total Asset Turnover (TAT) =
Sales/Total Assets
Fixed Asset Turnover (FAT) =
Sales/Fixed Assets
Operating Income Return on Investment (OIROI) =
Operating Income/Total Assets
Debt Ratio =
Total Debt/Total Assets
Debt-Equity Ratio =
Total Debt/Total Equity
Times Interest Earned (TIE) =
EBIT/Interest Expense
Cash Coverage Ratio =
(EBIT + Depreciation)/Interest Expense
Return on Assets (ROA) =
Net Income/Total Assets
Return on Equity (ROE) =
Net Income/Total Equity
Dupont ROE =
(Net Income/Sales) x (Sales/Total Assets) x (Total Assets/Equity)
Gross Margin =
Gross Profit/Sales
Operating Margin =
EBIT/Sales
Net Profit Margin =
Net Income/Sales
Price to Earnings (PE) =
Price Per Share/Earnings Per Share (EPS)
Price to Sales =
Price Per Share/Sales per Share
Market to Book =
Market Value per Share/Book Value per Share
New RE =
Old RE + Net Income - Dividends
New RE =
Old RE + [Projected Sales x Net Margin x (1-Payout Ratio)]
Net Margin =
Net Income/Sales
Payout Ratio =
1-Plowback Ratio
Plowback Ratio =
1-Payout Ratio
Payout Ratio =
Dividends/Net Income
Plowback Ratio =
∆Retained Earnings/Net Income
External Financing Needed (EFN) =
Projected Total Assets - Projected Total Liabilities - Projected Owners' Equity
Sales at Full Capacity =
Total Sales/Capacity %
Fixed Asset Capital Intensity Ratio =
Fixed Assets/Sales at Full Capacity
Required Investment in Fixed Assets =
Projected Sales x Fixed Asset Capital Intensity Ratio
Internal Growth Rate (IGR) =
(ROA x b)/(1 - ROA x b) (Note: b is the plowback ratio)
Return on Assets (ROA) =
Net Income/Total Assets
Sustainable Growth Rate (SGR) =
(ROE x b)/(1 - ROE x b) (Note: b is the plowback ratio)
Return on Equity (ROE) =
Net Income/Equity
DuPont Equation for ROE =
(Net Income/Sales) x (Sales/Total Assets) x (Total Assets/Equity)
Debt-Equity Ratio =
Total Debt/Total Equity
(Note: You can manipulate the Debt-Equity formula and the A = L + E formula to solve for beginning equity.)
Ending Equity =
Beginning Equity + (Net Income x Plowback Ratio)
Operating Cycle =
Inventory Period + Accounts Receivable Period
Inventory Period =
365/Inventory Turnover
Inventory Turnover =
COGS/Average Inventory
Accounts Receivable Period =
365/Accounts Receivable Turnover
Accounts Receivable Turnover =
Credit Sales/Average Accounts Receivable
Cash Cycle =
Operating Cycle - Accounts Payable Period
Accounts Payable Period =
365/Accounts Payable Turnover
Accounts Payable Turnover =
COGS/Average Accounts Payable
Present Value of Perpetuity =
Payment/Interest Rate
(Note: Interest rate is calculated as decimal #; match numerator and denominator as quarterly, semiannual, annual, etc.)
Return on Perpetuity =
Payment/Present Value
(Note: Payment must be an ANNUAL amount.)
Simple Interest =
Original Principal x Quoted Interest Rate x # Years Invested
Compound Interest =
Future Value - Original Principal -Simple Interest
Effective Annual Rate (EAR) = [1 + (Quoted Rate/m)]m -1]
(Note: You may also use the NOM%, I/Yr, and EFF% calculator keystrokes for shortcut.)
Quoted Rate =
m =
Quoted Rate = Annual Percentage Rate (APR)
m = number of compounding periods per year
1st Month Interest =
Original Principal x Monthly Interest Rate
1st Month Principal =
Total Monthly Payment - 1st Month Interest
2nd Month Interest =
(Original Principal - 1st Month Principal) x Monthly Interest Rate
2nd Month Principal =
Total Monthly Payment - 2nd Month Interest
3rd Month Interest =
(Original Principal - 1st Month Principal - 2nd Month Principal) x Monthly Interest Rate
3rd Month Principal =
Total Monthly Payment - 3rd Month Interest