BUSI 408 Midterm Test
Anything that increases ____ will ROE
increase SGR by making the
numerator larger and the
denominator smaller
The cash flows from the _____ must firm; financial markets
exceed the cash flows from the
_____
Firms issue securities > firm invests in assets (current and fixed) >
Describe the path of capital cash flow from assets goes to government/other stakeholders,
dividends and debt payments, and are reinvested in into firm
Does debt or equity service have Debt
priority?
Does the average tax rate ever No but the marginal does
go down?
A firm must be a ____ generating cash
activity
How are present values and inversely
discount rates related?
- by helping the firm to select the best value creating projects
- allocation of limited resources to the highest value creating
How does the financial manager
projects
increase the value of the firm?
- maintaining focus on the shareholders wealth creation in the long
term
_____ is king Cash flow
internal (what the firm earns and subsequently plows back into the
What are a firm's two sources of
business) and external (funds raised by either borrowing money or
financing?
selling stocks)
standardized financial statements presenting all items in
What are common size percentage terms (balance sheet items are shown as a percentage
statements? of total assets and income statement items as a percentage of
sales)
Relationships determined from a firms financial information and
What are financial ratios?
used for comparison purposes
What are important things to Liquidity, debt vs equity, market value vs book value
keep in mind when examining a
balance sheet?
What are long term solvency total debt ratio, debt equity ratio, equity multiplier, TIE ratio, cash
ratios? coverage ratio
What are marginal taxes? percent tax paid on the next dollar earned
Earnings per share, price earnings ratio, price-sales ratio, market
What are market value ratios?
book ratio,
, BUSI 408 Midterm Test
They have the capital to invest and will allocated to best expected
What are providers of capital?
return opportunities. These are savers (individuals and institutions)
a chance in the firms overall future cash flow that comes about as a
What are relevant cash flows?
direct consequence of the decision to take that project
inventory turnover, days in sales inventory, receivables turnover,
What are some asset utilization
days sales in receivables, payables turnover, days costs in
ratios?
payables, total asset turnover, capital intensity
What are some long term Total debt ratio, debt equity ratio, equity multiplier
solvency measures?
there is no underlying theory to help us identify which items or
What are some potential
ratios to look at and guide us in establishing benchmarks; firms use
problems with financial statement
different accounting procedures; financial statements may not
analysis?
conform at all to GAAP
What are some profitability profit margin, ROA, ROE
measures?
What are some short term current ratio, quick ratio, cash ratio
solvency measures?
1. liquidity
2. asset management
What are the five major
3. debt management
categories of ratios?
4. profitability
5. market value
What are the four factors that profit margin, total asset turnover, financial policy, dividend policy
determine a firm's ability to
grow?
What are the four principles of accountability, transparency, fairness, responsibility
corporate governance?
What are the only ways to - add retained earnings
increase equity balance? - sell equity
What are the three groups that shareholders, managers, creditors
use ratios?
What are the two types of Sell side (investment bankers and brokers) and buy side (money
intermediaries? managers and mutual funds)
What are three ways to compare time, industry, sprint companies
ratios?
What does a firm's ability to grow its financing policy
depend on?
What does an investment in NCW a loan
resemble?
a measure of the firm's operating efficiency- how well it controls
What does profit margin tell us?
costs
What does the equity multiplier a measure of the firm's financial leverage
tell us?
Anything that increases ____ will ROE
increase SGR by making the
numerator larger and the
denominator smaller
The cash flows from the _____ must firm; financial markets
exceed the cash flows from the
_____
Firms issue securities > firm invests in assets (current and fixed) >
Describe the path of capital cash flow from assets goes to government/other stakeholders,
dividends and debt payments, and are reinvested in into firm
Does debt or equity service have Debt
priority?
Does the average tax rate ever No but the marginal does
go down?
A firm must be a ____ generating cash
activity
How are present values and inversely
discount rates related?
- by helping the firm to select the best value creating projects
- allocation of limited resources to the highest value creating
How does the financial manager
projects
increase the value of the firm?
- maintaining focus on the shareholders wealth creation in the long
term
_____ is king Cash flow
internal (what the firm earns and subsequently plows back into the
What are a firm's two sources of
business) and external (funds raised by either borrowing money or
financing?
selling stocks)
standardized financial statements presenting all items in
What are common size percentage terms (balance sheet items are shown as a percentage
statements? of total assets and income statement items as a percentage of
sales)
Relationships determined from a firms financial information and
What are financial ratios?
used for comparison purposes
What are important things to Liquidity, debt vs equity, market value vs book value
keep in mind when examining a
balance sheet?
What are long term solvency total debt ratio, debt equity ratio, equity multiplier, TIE ratio, cash
ratios? coverage ratio
What are marginal taxes? percent tax paid on the next dollar earned
Earnings per share, price earnings ratio, price-sales ratio, market
What are market value ratios?
book ratio,
, BUSI 408 Midterm Test
They have the capital to invest and will allocated to best expected
What are providers of capital?
return opportunities. These are savers (individuals and institutions)
a chance in the firms overall future cash flow that comes about as a
What are relevant cash flows?
direct consequence of the decision to take that project
inventory turnover, days in sales inventory, receivables turnover,
What are some asset utilization
days sales in receivables, payables turnover, days costs in
ratios?
payables, total asset turnover, capital intensity
What are some long term Total debt ratio, debt equity ratio, equity multiplier
solvency measures?
there is no underlying theory to help us identify which items or
What are some potential
ratios to look at and guide us in establishing benchmarks; firms use
problems with financial statement
different accounting procedures; financial statements may not
analysis?
conform at all to GAAP
What are some profitability profit margin, ROA, ROE
measures?
What are some short term current ratio, quick ratio, cash ratio
solvency measures?
1. liquidity
2. asset management
What are the five major
3. debt management
categories of ratios?
4. profitability
5. market value
What are the four factors that profit margin, total asset turnover, financial policy, dividend policy
determine a firm's ability to
grow?
What are the four principles of accountability, transparency, fairness, responsibility
corporate governance?
What are the only ways to - add retained earnings
increase equity balance? - sell equity
What are the three groups that shareholders, managers, creditors
use ratios?
What are the two types of Sell side (investment bankers and brokers) and buy side (money
intermediaries? managers and mutual funds)
What are three ways to compare time, industry, sprint companies
ratios?
What does a firm's ability to grow its financing policy
depend on?
What does an investment in NCW a loan
resemble?
a measure of the firm's operating efficiency- how well it controls
What does profit margin tell us?
costs
What does the equity multiplier a measure of the firm's financial leverage
tell us?
