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34 terms

Finance Final

STUDY
PLAY
Corporation
Which of the following legal forms of organization is characterized by limited liability?
Making investment and financial decisions
The primary emphasis of the financial manager is the use of____
Maximize profit of the owners
The primary goal of the financial manager is____
The share price of the stock
The wealth of the owners of a corporation is represented by_____
Operating Profits
Profits earned from producing and selling products (EBIT)
Financial Leverage
_____ is a term used to describe the magnification of risk and return introduced through the use of fixed cost financing such as preferred stock and long-term debt.
Net Profit Margin
The _______ measures the percentage of each sales dollar remaining after ALL expenses, including taxes, have been deducted.
Operating Cash Flow (OCF)
The cash flow a firm generates from its normal operations
Operating, Investment, Financing
Which of the following is a source of cash flows?
A number of operating budgets, cash budget, and pro forma financial statements
The key output (s) of the short-run financial planning process are a(n)_____
Cash Budget
The________ is a financial projection of the firm's short-term cash surpluses or shortages
Depreciation and other noncash charges
Cash disbursements may include all of the following EXCEPT
Assumes all costs are variable
A weakness of the percent-of-sales method to preparing a pro forma income statement
Tends to understate profits when sales are increasing
In a period of rising sales, utilizing past cost and expense ratios (percent-of-sales method) when preparing pro forma financial statements will tend to
Portfolio
A collection of assets is called
The higher the required return
the higher an asset's beta,
Capital Budgeting
_____is the process of evaluating and selecting long-term investments consistent with the firm's goal of owner wealth maximization
Internal Rate of Return (IRR)
The______ is the discount rate that equates the present value of the cash inflows with the initial investment
Cost of Capital
The______ is the rate of return a firm must earn on its investments in projects in order to maintain the market value of its stock
Net proceeds; Flotation costs
The ______ from the sale of a security are the funds actually received from the sale after_____, or the total costs of issuing and selling the security, which have been subtracted from the total proceeds
Breakeven Analysis
Is a technique used to assess the returns associated with various cost structures and levels of sales
Variable
_____costs are a function of volume, not time
Total
_____ leverage is concerned with the relationship between sales revenue and earnings per share
EBIT; EPS
The higher financial leverage causes____ to increase more for a given increase in _______
Lower the market price
The purpose of a stock split is to____
Increase the market price
The purpose of a reverse stock split is to _____
Increase; Increase
The repurchase of stock____ the earnings per share and _____ the market price of stock
Net Working Capital
The portion of a firm's current assets financed with long-term funds may be called
Technically Insolvent
In working capital management, risk is measured by the probability that a firm will become________
Risk decreases
In general, the more net working capital a firm has,
Permanent and seasonal
The firm's financing requirements can be separated into
Accruals
_______are liabilities for services received for which payment has yet to be made. The most common accounts are taxes and wages
Revolving credit agreements
A line of credit guaranteed to a borrower by a commercial bank regardless of the scarcity of money. Commitment fee usually charged. Can be greater than 1
Factoring
_____involves the sale of accounts receivable