FNAN 300 STUDY GUIDE
Comparative Analysis (cross-sectional) - Answers :We compare to their industry
average
Trend Analysis (time series) - Answers :calculate a ratio for more than one period in
order to uncover
Common size income statement - Answers :income statement in which each item is
expressed as a % of sales
Net demander of funds - Answers :businesses, bowering through loans, bonds, CS PS
investors
Net Supplier of Funds - Answers :Individuals
Financial Institution - Answers :take in deposits, premiums, etc, and loan or invest the
money
Financial Market - Answers :1. Money Market- short term debt instruments that are
traded in the market. less than a year
2.Capital Market- long term debt instrument that are traded in the market
3. Primary Capital Market- flow of capital from invests to businesses with good ideas
4. Second Capital Market- facilitates a liquid market for the primary market
Agency Issue - Answers :they are employed to represent the owners' interest. however,
management's actions may not be observable to outside parties including the
shareholders in large corporation
Business Ethics - Answers :standards of conduct or moral judgment that apply to
persons engaged in commerce
balance sheet definition - Answers :the balance sheet is a STOCK; it represents a
single point in time
-left hand side: investments & assets
-right hand side: financing mix or liabilities and equity
income statement definition - Answers :a FLOW; represents time period
-represents performance of the firm for some specified time period (month, quarter,
year)
-measures REVENUE generated for that period & to it we match all associated
expenses (MATCHING PRINCIPLE)
-also called the Profit & Losses Statement or P&L
, statement of cash flow definition - Answers :a FLOW; where the cash came from, how it
was used and the change in the cash balance
Working Capital - Answers :current assets, which represent the portion of investment
that circulates from one form to another in the ordinary conduct of business
Current assets - Answers :short-term assets, converted into cash within a year or less
Financial Planning - Answers :planning with long-term or strategic, financial plans that in
turn guide the formulation of short-term or operating, plans and budget financial analysis
Strategic financial plans - Answers :long-term 10 years. year out integrated strategy
Operating Financial plans - Answers :short-term. sales forecast(starting point for all
short-term planning)
Econometric Model - Answers :Predict future sales
MARCS - Answers :an accelerated depreciation method
The higher a firm's debt utilization ratios, the - Answers :more risky the firm's financial
position
A firm has $200,000 in current assets, $800,00 in long-term assets and $900,000 in
long-term financing. What is its net working capital? - Answers :$100,000
___ analysis involves the comparison of different firm's financial ratios at the same point
in time - Answers :Cross-sectional
The___ is used to measure the efficiency with which the firm is using its earnings assets
to generate sales - Answers :Fixed asset turnover
The higher the value of __ ratio, the better able the firm is to fulfill its interst obligations -
Answers :time interest earned
The __ ratio is commonly used to assess the market's appraisal of the share value -
Answers :price/earnings
The cash budget gives the financial manager a clear view of timing of the firm's
expected profitability over a given time - Answers :False
A pro forma income statement is prepared so the accountants can close out the historic
balance sheet and publish the annual report - Answers :false
Comparative Analysis (cross-sectional) - Answers :We compare to their industry
average
Trend Analysis (time series) - Answers :calculate a ratio for more than one period in
order to uncover
Common size income statement - Answers :income statement in which each item is
expressed as a % of sales
Net demander of funds - Answers :businesses, bowering through loans, bonds, CS PS
investors
Net Supplier of Funds - Answers :Individuals
Financial Institution - Answers :take in deposits, premiums, etc, and loan or invest the
money
Financial Market - Answers :1. Money Market- short term debt instruments that are
traded in the market. less than a year
2.Capital Market- long term debt instrument that are traded in the market
3. Primary Capital Market- flow of capital from invests to businesses with good ideas
4. Second Capital Market- facilitates a liquid market for the primary market
Agency Issue - Answers :they are employed to represent the owners' interest. however,
management's actions may not be observable to outside parties including the
shareholders in large corporation
Business Ethics - Answers :standards of conduct or moral judgment that apply to
persons engaged in commerce
balance sheet definition - Answers :the balance sheet is a STOCK; it represents a
single point in time
-left hand side: investments & assets
-right hand side: financing mix or liabilities and equity
income statement definition - Answers :a FLOW; represents time period
-represents performance of the firm for some specified time period (month, quarter,
year)
-measures REVENUE generated for that period & to it we match all associated
expenses (MATCHING PRINCIPLE)
-also called the Profit & Losses Statement or P&L
, statement of cash flow definition - Answers :a FLOW; where the cash came from, how it
was used and the change in the cash balance
Working Capital - Answers :current assets, which represent the portion of investment
that circulates from one form to another in the ordinary conduct of business
Current assets - Answers :short-term assets, converted into cash within a year or less
Financial Planning - Answers :planning with long-term or strategic, financial plans that in
turn guide the formulation of short-term or operating, plans and budget financial analysis
Strategic financial plans - Answers :long-term 10 years. year out integrated strategy
Operating Financial plans - Answers :short-term. sales forecast(starting point for all
short-term planning)
Econometric Model - Answers :Predict future sales
MARCS - Answers :an accelerated depreciation method
The higher a firm's debt utilization ratios, the - Answers :more risky the firm's financial
position
A firm has $200,000 in current assets, $800,00 in long-term assets and $900,000 in
long-term financing. What is its net working capital? - Answers :$100,000
___ analysis involves the comparison of different firm's financial ratios at the same point
in time - Answers :Cross-sectional
The___ is used to measure the efficiency with which the firm is using its earnings assets
to generate sales - Answers :Fixed asset turnover
The higher the value of __ ratio, the better able the firm is to fulfill its interst obligations -
Answers :time interest earned
The __ ratio is commonly used to assess the market's appraisal of the share value -
Answers :price/earnings
The cash budget gives the financial manager a clear view of timing of the firm's
expected profitability over a given time - Answers :False
A pro forma income statement is prepared so the accountants can close out the historic
balance sheet and publish the annual report - Answers :false
