Corporate Finance Quiz One
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Name five types of ratios
- Financial Leverage
- Market Value
What happens to bond prices when interest rates go up?
Bond prices go down.
Name a profitability ratio
- Profit margin
- Net income/Sales
Name a financial leverage ratio
- Debt Ratio
- Total Debt/Total Assets
Name a Liquidity Ratio
- Current Ratio
- Current Assets/Current Liabilities
Name an Activity Ratio
- Asset turnover ratio
- Net sales/ Average total assets
Name a market value ratio
- Price/ earnings ratio
- Market price per share/ Earnings per share
Should FIFO be used for financial or tax accounting?
For tax accounting, should I use LIFO or FIFO?
What is the formula for straight line depreciation per year?
(Original value - salvage value)/Number of years
What is the formula for valuing a perpetuity?
Payment/discount rate (minus growth rate)
List five assets in the order they should be on a balance sheet
- Marketable securities
- Accounts Receivable
- Property Plant & Equipment
List three liabilities in the order they should go on a balance sheet
- Short term debt
- Accounts payable
- Long term debt
What goes on a balance sheet besides assets and liabilities?
What are the three main types of financial reports?
- Balance sheet
- Income statement
- Cash Flow statement
How does depreciation show up on an income statement?
As a loss
How does depreciation show up on a cash flow statement?
As freeing up cash because it is a non-cash expense.
How do you decide if an expense is capitalized or expensed?
Whether it provides income past the current year
How do you calculate earnings per share?
Net income divided by average number of shares outstanding
When calculating fully diluted EPS, when are options exercised?
At the beginning of the year
What happens to the price of bond in a bull market?
What is a bull market?
When securities gain value
What is a bear market?
When securities lose value
What kind of bond are treasury POs like? Are they more or less volatile than traditional treasuries?
PO=Principal only, like zero coupon bonds. More volatile because longer time to repayment and more risk of rate changes.
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