FIN 461 Exam #1 Study Guide |157 Questions and Answers
equity debt - -Commonly analysts evaluate an investment in some type of security that has
characteristics of an ____(representing an ownership position), or ____, (representing a
lending position).
-performance financial position value - -In arriving at investment decisions or
recommendations analysts need to evaluate the _______, _____ ______, and ____ of the company
issuing the securities.
-equity investment merger acquisition subsidiary operating venture capital private
creditworthiness credit debt covenants debt ratio security net income cash flow - -Types of
economic decisions:
- evaluating an _____ ______ for inclusion in portfolio; individual or institutional
- evaluating a _____ or _______ candidate; corporate manager
- evaluating a ________ or ______ division of a parent company
- deciding whether to make a _____ _____ or other _____ equity investment
- determining the ___________ of a company that has made a loan request; credit loan officer
- extending ____ to a customer
- examining compliance with ____ _____ or other contractual agreements
- assigning a ____ ____ to a company or bond issue; bond rating (measure of default risk)
- valuing a ______ for making a recommendation to others; analysts
- forecasting future ____ _____ and ____ ____
-return on capital cost of capital grow cash flow obligations - -Central focus of financial
analysis:
- Does the company earn a ____ ___ _____ that exceeds the ____ ___ ______?
- Can the company profitably ____ its business?
- Does the company generate ____ _____ greater than the _______?
-risks - -Analysts are concerned with factors that affect ____ to the company's future
performance and financial position.
-profitability - -the ability to earn a profit from delivering goods and services
-cash flow generating ability - -the ability to produce cash receipts in excess of cash
disbursements
-profit - -represents the excess of the prices at which goods or services are sold over all
the costs of providing those goods and services (regardless of when cash is received or
paid)
-flexibility returns - -Positive cash flows from operations provides ______ in funding need
for investments and taking advantage of attractive business opportunities- also source of
_____ to providers of capital.
, -contractual - -Importance of cash flow to creditors is a _______ claim.
-residual - -Importance of cash flow to shareholders is a _____ claim.
-liquidity - -the ability to meet short-term obligations
-solvency - -the ability to meet long-term obligations
-future profitability - -Current EPS and trends in EPS are indicators of _____ ______.
-price - -= P/E ratio x EPS
-income statement - -presents information on the financial results of a company's business
activities over a period of time
-consolidated basis - -Income statement is reported on a _________ ____- they include the
revenues and expenses of affiliated companies under the control of the parent company.
-income statement - -The basic underlying equation of the _____ _____ is revenue - expenses
= net income
-operating income - -(EBIT) reflects the company's underlying performance independent
of the use of financial leverage
-earnings per share - -= net income / # shares outstanding during period
-basic EPS - -= net income / weighted average of common shares outstanding during
period
-diluted EPS - -= net income / weighted average # of common shares assuming conversion
of stock options and convertible bonds
-diluted shares - -the number of shares that would be outstanding if potentially dilutive
claims on common shares (stock options) were exercised by their holders
-statement of other comprehensive income - -statement that includes all items that impact
owners' equity but are NOT the result of transactions with shareholders
-balance sheet - -presents a company's current financial position by disclosing resources
the company controls (assets) and what it owes (liabilities) at a specific point in time
-owners equity - -represents the excess of assets over liabilities; attributed to owners or
shareholder of the business; residual interest in the assets after deducting its liabilities
-balance sheet - -The basic underlying formula of the ____ ____ is assets = liabilities + equity
equity debt - -Commonly analysts evaluate an investment in some type of security that has
characteristics of an ____(representing an ownership position), or ____, (representing a
lending position).
-performance financial position value - -In arriving at investment decisions or
recommendations analysts need to evaluate the _______, _____ ______, and ____ of the company
issuing the securities.
-equity investment merger acquisition subsidiary operating venture capital private
creditworthiness credit debt covenants debt ratio security net income cash flow - -Types of
economic decisions:
- evaluating an _____ ______ for inclusion in portfolio; individual or institutional
- evaluating a _____ or _______ candidate; corporate manager
- evaluating a ________ or ______ division of a parent company
- deciding whether to make a _____ _____ or other _____ equity investment
- determining the ___________ of a company that has made a loan request; credit loan officer
- extending ____ to a customer
- examining compliance with ____ _____ or other contractual agreements
- assigning a ____ ____ to a company or bond issue; bond rating (measure of default risk)
- valuing a ______ for making a recommendation to others; analysts
- forecasting future ____ _____ and ____ ____
-return on capital cost of capital grow cash flow obligations - -Central focus of financial
analysis:
- Does the company earn a ____ ___ _____ that exceeds the ____ ___ ______?
- Can the company profitably ____ its business?
- Does the company generate ____ _____ greater than the _______?
-risks - -Analysts are concerned with factors that affect ____ to the company's future
performance and financial position.
-profitability - -the ability to earn a profit from delivering goods and services
-cash flow generating ability - -the ability to produce cash receipts in excess of cash
disbursements
-profit - -represents the excess of the prices at which goods or services are sold over all
the costs of providing those goods and services (regardless of when cash is received or
paid)
-flexibility returns - -Positive cash flows from operations provides ______ in funding need
for investments and taking advantage of attractive business opportunities- also source of
_____ to providers of capital.
, -contractual - -Importance of cash flow to creditors is a _______ claim.
-residual - -Importance of cash flow to shareholders is a _____ claim.
-liquidity - -the ability to meet short-term obligations
-solvency - -the ability to meet long-term obligations
-future profitability - -Current EPS and trends in EPS are indicators of _____ ______.
-price - -= P/E ratio x EPS
-income statement - -presents information on the financial results of a company's business
activities over a period of time
-consolidated basis - -Income statement is reported on a _________ ____- they include the
revenues and expenses of affiliated companies under the control of the parent company.
-income statement - -The basic underlying equation of the _____ _____ is revenue - expenses
= net income
-operating income - -(EBIT) reflects the company's underlying performance independent
of the use of financial leverage
-earnings per share - -= net income / # shares outstanding during period
-basic EPS - -= net income / weighted average of common shares outstanding during
period
-diluted EPS - -= net income / weighted average # of common shares assuming conversion
of stock options and convertible bonds
-diluted shares - -the number of shares that would be outstanding if potentially dilutive
claims on common shares (stock options) were exercised by their holders
-statement of other comprehensive income - -statement that includes all items that impact
owners' equity but are NOT the result of transactions with shareholders
-balance sheet - -presents a company's current financial position by disclosing resources
the company controls (assets) and what it owes (liabilities) at a specific point in time
-owners equity - -represents the excess of assets over liabilities; attributed to owners or
shareholder of the business; residual interest in the assets after deducting its liabilities
-balance sheet - -The basic underlying formula of the ____ ____ is assets = liabilities + equity
