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23 terms

Fundamentals of Corporate Finance Midterm Review

Based on terms from Fundamentals of Corporate Finance (10th edition) by Ross, Westerfeild, and Jordan These flashcards copied from thisnameistaken (another Quizlet user)
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working capital management
how will we manage the day-to-day financial activities?
capital structuring
how will this investment be financed?
capital structure
the mixture of debt and equity maintained by a firm
capital budgeting
what long term investments should the firm make?
capital budgeting
the process of planning and managing a firm's long-term investments.
net working capital
current assets - current liabilities
what is the term for the money you have for daily operating?
net working capital
depreciation
_________ does not affect cash flow.
agency problem
the possibility of conflict of interest between the owners and management of the firm
would there be an agency problem in a sole proprietorship?
no, because the agent is the principal
noncash expenses
expenses charged against revenues that do not directly affect cash flow, such as depreciation.
generally accepted accounting principles [G A A P]
the common set of standards and procedures by which audited financial statements are prepared.
OCF (operating cash flow) equation
earnings before interest and taxes (EBIT) + depreciation - taxes
operating cash flow [OCF]
cash generated from a firm's normal business activities
common-size statement
a standardized financial statement presenting all items in percentage terms. balance sheet items are shown as percentage of assets and income statement items as a percentage of sales.
EBIT
Earnings Before Interest & Taxes
profit margin
net income/sales
what is a profit margin?
how much profit is generated for each dollar in sales
what financial statement do you need to figure out your profit margin?
income statement
simple interest
interest earned only on the original principal amount invested.
compound interest
interest earned on both the initial principal and the interest reinvested from prior periods.
compounding
the process of accumulating interest in an investment over time to earn more interest.
Earnings before interest and tax [E B I T]
Sales - Cost of goods sold - Operating expenses