Lanari

Finance vs. Accounting - finance is forward looking accounting is backward looking Accounting - recording, reporting, and summarizing past financial information and transactions finance - management and allocation of capital (money) 3 primary areas of finance - business finance investments financial institutions business of finance - deals with sources of funding Capital Structure - the mixture of debt and equity used to finance a firm Asset Pricing - The process of valuing assets. cur...

Balance Sheet Forecasting - Using sales growth and the profit forecast to construct a pro forma balance sheet to understand the future implications of the sources and uses of finances Discretionary accounts - Accounts that do not vary proportionally with sales but are decided upon by management Discretionary Financing Needed (DFN) - The additional financing needed given a firm's expectations for future growth How can a firm grow its fixed assets if it is expecting growth but has reached c...

What is a reasonable alternative to keeping an emergency stash of cash? Investing in a savings account Investing in a readily withdrawable account that still earns some interest is a value-preserving alternative. Which area of finance deals with sources of funding and the capital structure of corporations and seeks to increase the value of a firm to its owners? Business finance is the area of finance that deals with uses and sources of funding to increase the value of the firm. What is t...

7 What is the term for the risk that changes in interest rates will impact the value of a bond? 1.Interest rate risk 2.Firm-specific risk 3.Default risk 4.Systematic risk - Interest rate risk A company called Bobby's Books is considering purchasing a new bookbinding machine. The company calculates the hurdle rate of the project to be 9% and the IRR to be 11%. Should the company purchase the bookbinding machine? 1.No, because the hurdle rate is lower than the IRR. 2.Yes, because the IR...

Business finance - Which area of finance deals with sources of funding and the capital structure of corporations and seeks to increase the value of a firm to its owners? Finance focuses on the future, while accounting is generally backward-looking. - What is the primary difference between finance and accounting? Investments - Which subspecialty of finance primarily involves deciding which assets will create more wealth and earn positive returns? Investments - An area of finance that deals ...

1 What is the primary goal of the financial manager of a firm? - To maximize owner wealth 3 What is the primary aim of personal finance goals? - To maximize satisfaction from products purchased and services obtained 3 Which subspecialty of finance primarily involves deciding which assets will create more wealth and earn positive returns? - Investments A company calculated variances of a budget and actual cash flows that indicate the firm's strengths and weaknesses in cash flows and its...

How is risk defined in finance? - The possibility that the realized or actual return will differ from what we expect. (Risk is defined a s the possibility that the realized or actual return will differ from our expected return.) The nominal interest rate of an investment is 8%, and the inflation rate is 3%. What is the real interest rate? - 5% (Real Rate = Nominal Rate - Inflation, so 8% - 3% = 5%) What is another name for the cost of capital? - Discount rate

Accounts Receivable Turnover (AR Turnover) - An activity ratio found by credit sales divided by accounts receivable. Average Collection Period (ACP) - An activity ratio found by the number of days in a year (365) divided by AR turnover. Current Ratio - A liquidity ratio found by current assets divided by current liabilities. Current ratio - Which ratio helps an analyst evaluate whether a company can cover its short-term obligations? Debt Ratio - A financing ratio found by total liabilitie...

Accounts Receivable Turnover - An activity ratio found by credit sales divided by accounts receivable. Activity Ratios - A category of ratios that measure how well a company uses its assets to generate sales or cash, showing the firm's operational efficiency and profitability. Average Collection Period - An activity ratio found by the number of days in a year (365) divided by AR turnover. Benchmarking - The process of completing a financial analysis to compare a firm's financial perform...

Accounting - The system of recording, reporting, and summarizing past financial information and transactions. Accounts Receivable Turnover (AR Turnover) - An activity ratio found by credit sales divided by accounts receivable. Activity Ratios - A category of ratios that measure how well a company uses its assets to generate sales or cash, showing the firm's operational efficiency and profitability. Additional Funds Needed (AFN) - Another name for the discretionary financing needed or exte...