FINA 3000 Pope questions and solutions

FINA 3000 Pope questions and solutions

what are the 5 guiding principles of Finance? - answersmaximize wealth, time value of money, risk vs return,
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leverage, diversification
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leverage - answersthe concept of how much debt a firm issues for its projects ji ji ji ji ji ji ji ji ji ji ji ji ji




LBO - answersLeveraged buyout. This is when a firm is purchased with a ton of debt.
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Gross Profit = - answerssales - COGS ji ji ji ji ji ji




AR turnover - answersSales/AR
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EAR is - answersthe annual rate to get a specific FV
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shareholder equity represents - answersthe book value not the market value ji ji ji ji ji ji ji ji ji ji




Market Capitalization - answersvalue according to the stock market. shares outstanding x market price
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Enterprise Value - answerstotal market value of the stock + book value of all liabilities - cash ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji




Liquidity Ratios - answersmeasure short-term ability of the company to pay its cash requirements
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liquidity ratios from most optimistic to most conservative - answerscurrent, quick, cash
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efficiency ratios - answerstell you how well your assets are being managed (greater ratio, greater the
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efficiency) ex. accts receivable turnover, inventory turnover, total asset turnover, fixed asset turnover,
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collections, days held
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coverage ratios - answersratios that measure the firm's ability to make interest payments ji ji ji ji ji ji ji ji ji ji ji ji




leverage ratios - answersbalance sheet measure of default risk and credit capacity
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Profitablity Ratios - answersmost important if you're running a business. ratios used to evaluate the earningsji ji ji ji ji ji ji ji ji ji ji ji ji ji ji




performance of a business during the accounting period
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Arm's Length Transaction - answersa transaction between two parties that have no relationship with each
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other and who are negotiating on behalf of their own best interests. A fairly negotiated transaction and
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reasonably representative of market value.
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Valuation Ratios - answershow does the market value the firm look relative to our accounting or book values
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higher price to earnings ratio (P/e) - answershigher growth potential, higher cost
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