Summary
Summary elaboration of a preliminary discussion on Finance 2
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This document contains the elaboration of the pre-discussion of Finance 2 year 2 FTA. It also includes a number of important formulas.
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Finance tentamen uitwerking.Basic principles of finance.
- Cash flow is what matters.
o Het gaat om het geld dat op korte termijn beschikbaar is want alleen daar kun je mee
betalen.
Incremental cashflow is de toename bij het invoeren van een project.
Marginal cashflow is de standaard cashflow bij normale activiteiten.
- Money has time value.
- Risk requires a reward.
- Market prices are generally right.
- Conflicts of interest cause agency problems.
Different types of markets.
- Public offerings/ pirvate placements.
- Primary market, new stock.
- Secondary market, al eerder verkocht stock opnieuw verkopen.
- The money market, short-term transactions in debt(<1jaar).
- Capital market, long-term transaction in debt(>1jaar).
- Sport market, nu iets verkocht op dit moment.
- Future market, iets in de toekomst kopen, contract met wat wanneer en hoeveel.
- Organized security exchange markets, nemen fysiek ruimte in.
- Over-the-counter market, alles behave security exchange.
Investment banker. Wordt door de bedrijf aangesteld om stock te verkopen.
- Underwriting, stelt aan de hand van het risico een prijs op.
- Distributing, vervolgens moeten ze het doorverkopen naar de uiteindelijke investerder.
- Advising, adviseren welke prijs en wanneer je het beste stock kan verkopen.
Flotation cost. Kosten die te maken hebben met het uitgeven van stock.
- Underwriters spread: her verschil tussen wat het bedrijf krijgt en wat de klant betaald.
- Issuing cost: printing, legal fee, accounting fee, trustee fee, other miscellaneous things.
Maturity-risk premium: extra geld dat wordt voor langlopende investeringen om het grotere risico.
Liquidity-risk premium: extra geld gevraagd voor securities dat niet snel in geld kan worden omgezet.
Default-risk premium: extra geld voor het risico van niet betalen.
Inflation-risk premium: extra geld voor de verwachte inflatie durende de looptijd.
Nominal interest rate = Real rate of interest + inflation risk premium+ default risk premium +
maturity risk premium + liquidity risk premium.
Statement of cashflows: (operations, investments financing)
- Operations= net income+ depreciation- increase accounts receivable- increase inventory-
increase current assets+ increase accounts payable+ increase accrued expenses.
- Investments= fixed assets, longterm investments, goodwill, patents, trademarks (verschil)
- Financing= short-term/long-term debt. Banken, new stock, dividend betalen.
- Operations- Investments- Financing= statement of cashflow.
Financial ratios:
current assets accountsrecievable
current ratio= acidtest=cash+
current liabilities current liabilities
accountsrecievable turn annual credit sales
days ∈receivables= receivable =
annual credit sales/365 ratio account receivable
inventory turn cost of goods sold
days inventory = inventory
annnual cost of goods sold /365 ¿ inventory
operating profits sales
operating return on asset= ( ) ()= asset turnover
sales total asset
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