number of years that the dollars have been left on deposit
Interest rate earned on the account. It is entered as a whole number. It is never converted to a decimal and the percent sign is never used
the beginning dollar amount. A lump sum placed on deposit which will earn interest. IT IS ALWAYS NEGATIVE. To enter the amount, press the dollar value, press the +/- key, and then press PV
Present value (PV)
the ending dollar amount. The amount you would have upon withdrawal of funds from the account. IT IS ALWAYS POSITIVE
Future value (FV)
used for payments. This is a series of dollars received or spent consecutively. Payments would take the opposite sign of either FV or PV depending on whether you are using FV or PV
What are the key words to look for when looking for payment?
payments or deposits
any phrase that indicates that dollars will be regularly deposited
_____ mode is the default mode. All problems are in this mode unless specifically stated otherwise. In other words, all accounts earn interest at the end of the year.
______ mode is used when an account earns interest from day one. Clue words for this mode are _____.
Beginning of the year
If the interest is compounded more frequently than annually, divide interest by the frequency and multiply years by frequency.
What are some Corporate/Managerial Occupations in Finance?
Capital Budgeting Analyst
Project Finance Manager
Pension Fund Manager
What are some Occupations in Financial Services?
Banking & Related Institutions
Personal Financial Planning
What are strengths of a sole proprietorship?
owner gets all the profits
low start-up costs
easiest to establish
What are weaknesses of a sole proprietorship?
limited fund-raising power
owner must be jack-of-all-trades
lacks continuity when owner dies
What are strengths of partnerships?
borrowing power is enhanced
more managerial skill
can retain good employees
taxed as personal income
What are weaknesses of partnerships?
partnership dissolved at death
difficult to liquidate or transfer
may not achieve large scale operation
need to cover debts/actions of partners
What are strengths of corporations?
can achieve large size
not dissolved by death
What are weaknesses of corporations?
more expensive to organize
taxes are higher
greater government regulation
employees lack personal interest
lacks secrecy - public information
Balance sheet information is based on _____
a single day
Income Statement information is based on ______
a specified period of time
Assets on balance sheet recorded at ______
Assets are capitalized on the balance sheet. What does this mean?
recorded as an asset on the balance reduced by depreciation
Accounts receivable should be reported at ________ since not all receivables will be collected.
net realized value
Furniture, fixtures & equipment is reported at _______. Does not account for depreciation.
historical cost (acquisition basis)
______ accounting is used for stocks and bonds - adjusted for changes in price (called mark-to-market)
Some elements of the balance sheet are based on _____
arbitrary changes to lives of fixed assets
extending the life of an asset increases earnings
decreasing the life of an asset decreases earning
abusive earnings management
potential obligations from a past event - such as environmental contamination
must be adequately reported.
Not doing so would overstate company performance in the current period
Who are the users of the balance sheet?
the company itself
Internal Revenue Service
____ is the most illiquid asset
What are the three inventory accounts?
work in progress
finished goods inventory
What are the two types of leases?
operating leases (short-term)
capital leases (long-term)
Money due to be paid but not yet paid
accrued salaries & expenses
What is the formula to determine the tax rate?
tax paid/taxable income
There are 3 sources of equity - owner's equity account
stock at par
additional paid in capital
stock at par + additional paid in capital = total $ received from the sale of stock
what is the current ratio and should it be higher or lower?
current assets/current liabilities
What is the quick ratio? Higher or lower?
current assets less inventories/current liabilities
What is the debt-to-equity ratio? higher or lower?
total debt/shareholder's equity(total equity)
What is the debt ratio? Higher or lower?
total debt/total assets
What is the times interest earned ratio? Higher or lower?
What is the inventory turnover ratio? Higher or lower?
What is the total asset turnover (capital turnover) ratio? Higher or lower?
What is the return on sales ratio? Higher or lower?
net profit after taxes/sales
What is the Return on Investment (return on assets) ratio? Higher or lower?
net profit after taxes/total assets
What is the return on equity ratio? Higher or lower?
net profit after taxes (EAT)/ shareholder's equity (common equity)
What is the gross profit margin?
What is the operating margin?
The _____ is the sources and uses statement.
statement of cash flows
______ provides an actual accounting of cash on hand
Statement of Cash Flows
What are the two types of cash flows?
What is the difference between the two types of cash flows?
direct - begins with revenues and then adjusts for cash received and spent
indirect - begins with EAT and then adjusts it for actual cash received and spent
_____ uses percentage of sales method; determines a % increase in sales; utilizes the common size statement % and increases each account accordingly
What are the three sections of the cash flow statement?
Net cash from OPERATIONS
Net cash from INVESTING
Net cash from FINANCING
In the cash flow statement, source or use of cash from day-to-day operations; depreciation is added back in; indicated the success of the firm in generating cash from its regular operations; mature companies get most of their cash from this activity
Net Cash from Operations
In the cash flow statement, source or use of cash from selling & buying (including securities of other company); source of cash is dividend received by investing in another company; a company that is downsizing would receive cash from selling assets; this would be the largest source of cash.
Net Cash from Investing
In the cash flow statement, source and use of cash from selling securities or borrowing money or repaying debt; a growing company would get a sizable portion of its cash from this activity; a financially troubled company would get all of its cash from this activity
Net Cash from Financing
Stockholders are ____ averse
reflect whether or not the company can pay its day-to-day expenses
What are the two liquidity ratios?
reflect whether or not the firm is productive; measure management efficiency
What are the 4 activity ratios?
average collection period (365/receivable turnover)
reflect whether or not the company has borrowed too much money
What are the 3 leverage ratios?
times interest earned
measure whether or not the company is making money. Can the firm pay dividends?
gross profit margin
return on sales
return on assets
return on equity
What is the P/E ratio?
price of stock/earnings per share
What is the formula for earnings per share?
earnings available for common stockholders/# of shares of common stock outstanding
A financial report is a listing of company's ___ & ____
assets and liabilities
A financial report follows the ____ procedure
The financial report states ______ & ______
where a company has been
where it is going
annual disclosure of financial info due 90 days following company's fiscal year-end.
Balance sheet information is based on ___
a single day
Income Statement information is based on _____
a specified period of time
In the balance sheet, too much cash = ____
What are non-cash items?
Business - description of business
Risk Factors - most significant risks to the company or its securities
Management's Discussion and Analysis of Financial Condition and Results of Operations - company's perspective of business results of the past financial year