Business Finance Final

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  1. Operating Leverage increases:
    operating income & business risk
  2. Financial Levergae increases:
    earnings per share & financial risk
  3. Operating Levergae - top or bottom of Income Statement?
  4. Financial Leverage - top or bottom of Income Statement?
  5. EBIT is...
    Operating Income
  6. Operating Leverage deals with _________ operating costs
  7. High fixed costs = ______ variable operating income
    MORE - makes EBIT more volatile.
  8. Preferred Stock & Debt are _______ sources of financing
  9. Total Revenue = Total Cost at the
    Break Even Point
  10. Increase in Fixed Cost = ________ in Break Even point
  11. High Operating Leverage: increase in sales = ___ increase in operating income
  12. Contribution Margin:
    sales - variable costs
  13. To increase operating leverage, increase..
    fixed operating costs
  14. To increase financial leverage, increase...
  15. Degree of Operating Leverage =
    how much leverage a firm has (small change in sales rev. = larger change in operating income)
  16. DOL x ________ = change in Operating Income
    Change in Sales
  17. Financial Leverage:

    small change in Operating Income = ______ change in EPSS
  18. Financial Leverage:

    Small change in Operating Income = Large change in _________
    Earnings per Share
  19. DFL x Change in EBIT =
    Change in EPS
  20. DOL x Change in Sales =
    Change in EBIT (Op Income)
  21. DOL x ________ = Change in Op. Income
    Change in Sales
  22. DFL x ________ = Change in EPS
    Change in EBIT
  23. Degree of Combined Leverage:

    Small change in Sales =
    Large change in EPS
  24. DCL x Change in Sales =
    Change in EPS
  25. DCL x ______ = Change in EPS
    Change in Sales
  26. DOL x DFL =
    Degree of Combined Leverage
  27. DCL x Change in Sales =
    Change in EPS
  28. DCL x ________ = Change in EPS
    Change in Sales
  29. To find percent change... (formula)
    • (new - old)
    • old
  30. Sales - VC - FC =
    EBIT (Op. Income)
  31. Sentence to remember order of Triangle...
    Some Day Call Eric Properly Don't Forget Eric Before Driving Off
  32. Sentence to remeber Income Statement:
    So Far Very Excited I Eat Things Not Interested
  33. Capital Structure
    Break-down of where your money comes from
  34. Earnings Per Share =
    Net Income / Shares Outstanding
  35. Modigliani-Miller Hypothesis or the "Independence"/"Irrelevance Hypothesis states:

    In a perfect market capital structure _________
    Does not matter.
  36. EPS = _____ / Shares Outstanding
    Net Income
  37. EPS = Net Income / ____________
    Shares Outstanding
  38. Optimal Capital Structure: ____ cost of capital and ______ firm value
    minimizes, maximizes
  39. As cost of capital decreases, NPV ________
  40. Residual Dividiend Theory
    Pays out divident only if there is capital left after financing all profitable investment opportunities
  41. Residual Dividend Theory:

    ______ capital gains and ____ flotation costs
    maximizes, minimizes
  42. Market Capitalization
    # of Shares x Price
Card Set:
Business Finance Final
2011-06-26 04:22:47

Final Exam - Business Finance
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