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Based on terms from Fundamentals of Corporate Finance (10th edition) by Ross, Westerfeild, and Jordan These flashcards copied from thisnameistaken (another Quizlet user)

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


_________ 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.


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.


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

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