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Universities » University of Southern Mississip.. » FIN - Finance » 300 - Principles of Finance » Flash Cards

Fin 300- Exam 1 - Flashcards

Flashcard Deck Information

Class:	FIN 300 - Principles of Finance
Subject:	Finance
University:	University of Southern Mississippi
Term:	Fall 2011

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INCORRECT

CORRECT

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Asset Turnover

Sales/ Assets

Helpful Hint: "Turnover" = Sales over ____

Ex: Stockholders Equity Turnover = Sales/SE

Exception: Inventory Turnover= Cost of Goods Sold/ Average Inventory

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Inventory Turnover

Cost of goods sold/ Average Inventory

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Basic Areas of Finance

1. Corporate Finance- business finance

2. Investments- Stockbroker, financial advisors, security analyst

3. Financial Institutions- Banks, insurance companies,

4. International Finances- be familiar with exchange rate and political risk

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Top Financial Manager within a firm is usually the

CFO

Chief Financial Officer

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Treasurer

Oversees cash mgt, credit mgt, capital expenditures, and financial planning

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Controller

Oversees taxes, cost accounting, financial accounting, and data processing

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Net working cap-

current assets- current liabilities

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liquidity

speed and ease of conversion to cash

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Book Value

the balance sheet value of the assets, liabilities, and equity

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market value

true value of the price at which the assets, liabilities, or equity can actually be bought or sold

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Income Statement

measures performance over a specifies period of time

Revenue - Expenses = net income

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Marginal Tax

percent paid on the next dollar earned

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Average Tax

Total tax bill/taxable income

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Current Ratio

Current Assets / Current Liabilities

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Quick Ratio

(Current Assets - Inventory) / Current Liabilites

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Cash Ratio

Cash/ Current Liabilities

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Total Debt Ratio

(Total Assets - Total Equity) / Total Assets

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Debt-Equity Ratio

Total Debt / Total Equity

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Times interest Earned Ratio

EBIT/ Interest

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Capital Intensity

Total Assets/ Sales

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Profit Margin

Net Income/Sales

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Return on Assets (ROA)

Net Income / Total Assets

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Return on Equity (ROE)

Net Income / Total Equity

Explanation:

Net Income/ Sales x Sales/Assets x Assets/Equity

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Price-Earnings Ratio

Price per share/ Earnings per Share

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Price-Sales Ratio

Price per share/ Sales per share

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Market to book ratio

Market value per share/ Book value per share

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Liquidity Ratios

Current Ratio
Quick Ratio
Cash Ratio

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Financial Leverage Ratios

Total Debt Ratio
Debt to Equity Ratio
Equity Mulitiplier
Times Interest Earned
Cash Coverage

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Asset Management Inventory Ratios

Inventory Turnover
Days' Sales in Inventory

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Profitability Measures

Profit Margin
Return on Assets
Return on Equity

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Market Value Measures

Earnings per Share
PE Ratio
Price/ Sales Ratio
Market to Book Ratio

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DuPont Identity

= Profit Margin x Total Assets Turnover x Equity Margin

Further...

ROE= (Net Income/Sales) x (Sales/ Total Assets) x (Total Assets/ Total Equity) = Net Income/ Total Equity

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Equity multiplier

measures firm's financial leverage

EM= TA/TE = 1+D/E

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Dividend Payout Ratio

Cash dividends/ Net Income

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Future Value Formula

Present Value x (1+ r) ^t

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Asset Turnover	Sales/ Assets Helpful Hint: "Turnover" = Sales over ____ Ex: Stockholders Equity Turnover = Sales/SE Exception: Inventory Turnover= Cost of Goods Sold/ Average Inventory
Inventory Turnover	Cost of goods sold/ Average Inventory
Basic Areas of Finance	1. Corporate Finance- business finance 2. Investments- Stockbroker, financial advisors, security analyst 3. Financial Institutions- Banks, insurance companies, 4. International Finances- be familiar with exchange rate and political risk
Top Financial Manager within a firm is usually the	CFO Chief Financial Officer

Generated by

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Treasurer	Oversees cash mgt, credit mgt, capital expenditures, and financial planning
Controller	Oversees taxes, cost accounting, financial accounting, and data processing
Net working cap-	current assets- current liabilities
liquidity	speed and ease of conversion to cash

Generated by

Koofers.com

Book Value	the balance sheet value of the assets, liabilities, and equity
market value	true value of the price at which the assets, liabilities, or equity can actually be bought or sold
Income Statement	measures performance over a specifies period of time Revenue - Expenses = net income
Marginal Tax	percent paid on the next dollar earned

Generated by

Koofers.com

Average Tax	Total tax bill/taxable income
Current Ratio	Current Assets / Current Liabilities
Quick Ratio	(Current Assets - Inventory) / Current Liabilites
Cash Ratio	Cash/ Current Liabilities

Generated by

Koofers.com

Total Debt Ratio	(Total Assets - Total Equity) / Total Assets
Debt-Equity Ratio	Total Debt / Total Equity
Times interest Earned Ratio	EBIT/ Interest
Capital Intensity	Total Assets/ Sales

Generated by

Koofers.com

Profit Margin	Net Income/Sales
Return on Assets (ROA)	Net Income / Total Assets
Return on Equity (ROE)	Net Income / Total Equity Explanation: Net Income/ Sales x Sales/Assets x Assets/Equity
Price-Earnings Ratio	Price per share/ Earnings per Share

Generated by

Koofers.com

Price-Sales Ratio	Price per share/ Sales per share
Market to book ratio	Market value per share/ Book value per share
Liquidity Ratios	Current Ratio Quick Ratio Cash Ratio
Financial Leverage Ratios	Total Debt Ratio Debt to Equity Ratio Equity Mulitiplier Times Interest Earned Cash Coverage

Generated by

Koofers.com

Asset Management Inventory Ratios	Inventory Turnover Days' Sales in Inventory
Profitability Measures	Profit Margin Return on Assets Return on Equity
Market Value Measures	Earnings per Share PE Ratio Price/ Sales Ratio Market to Book Ratio
DuPont Identity	= Profit Margin x Total Assets Turnover x Equity Margin Further... ROE= (Net Income/Sales) x (Sales/ Total Assets) x (Total Assets/ Total Equity) = Net Income/ Total Equity

Generated by

Koofers.com

Equity multiplier	measures firm's financial leverage EM= TA/TE = 1+D/E
Dividend Payout Ratio	Cash dividends/ Net Income
Future Value Formula	Present Value x (1+ r) ^t

Generated by

Koofers.com

List View: Terms & Definitions

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	Front	Back
	Asset Turnover	Sales/ Assets Helpful Hint: "Turnover" = Sales over ____ Ex: Stockholders Equity Turnover = Sales/SE Exception: Inventory Turnover= Cost of Goods Sold/ Average Inventory
	Inventory Turnover	Cost of goods sold/ Average Inventory
	Basic Areas of Finance	1. Corporate Finance- business finance 2. Investments- Stockbroker, financial advisors, security analyst 3. Financial Institutions- Banks, insurance companies, 4. International Finances- be familiar with exchange rate and political risk
	Top Financial Manager within a firm is usually the	CFO Chief Financial Officer
	Treasurer	Oversees cash mgt, credit mgt, capital expenditures, and financial planning
	Controller	Oversees taxes, cost accounting, financial accounting, and data processing
	Net working cap-	current assets- current liabilities
	liquidity	speed and ease of conversion to cash
	Book Value	the balance sheet value of the assets, liabilities, and equity
	market value	true value of the price at which the assets, liabilities, or equity can actually be bought or sold
	Income Statement	measures performance over a specifies period of time Revenue - Expenses = net income
	Marginal Tax	percent paid on the next dollar earned
	Average Tax	Total tax bill/taxable income
	Current Ratio	Current Assets / Current Liabilities
	Quick Ratio	(Current Assets - Inventory) / Current Liabilites
	Cash Ratio	Cash/ Current Liabilities
	Total Debt Ratio	(Total Assets - Total Equity) / Total Assets
	Debt-Equity Ratio	Total Debt / Total Equity
	Times interest Earned Ratio	EBIT/ Interest
	Capital Intensity	Total Assets/ Sales
	Profit Margin	Net Income/Sales
	Return on Assets (ROA)	Net Income / Total Assets
	Return on Equity (ROE)	Net Income / Total Equity Explanation: Net Income/ Sales x Sales/Assets x Assets/Equity
	Price-Earnings Ratio	Price per share/ Earnings per Share
	Price-Sales Ratio	Price per share/ Sales per share
	Market to book ratio	Market value per share/ Book value per share
	Liquidity Ratios	Current Ratio Quick Ratio Cash Ratio
	Financial Leverage Ratios	Total Debt Ratio Debt to Equity Ratio Equity Mulitiplier Times Interest Earned Cash Coverage
	Asset Management Inventory Ratios	Inventory Turnover Days' Sales in Inventory
	Profitability Measures	Profit Margin Return on Assets Return on Equity
	Market Value Measures	Earnings per Share PE Ratio Price/ Sales Ratio Market to Book Ratio
	DuPont Identity	= Profit Margin x Total Assets Turnover x Equity Margin Further... ROE= (Net Income/Sales) x (Sales/ Total Assets) x (Total Assets/ Total Equity) = Net Income/ Total Equity
	Equity multiplier	measures firm's financial leverage EM= TA/TE = 1+D/E
	Dividend Payout Ratio	Cash dividends/ Net Income
	Future Value Formula	Present Value x (1+ r) ^t

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