Finance Exam 1
CapEx
Net Capital Expenditures
NWC
Net Working Capital
The Treasury yield curve plots the yields on Treasury notes and bonds relative to the ____ of those securities.
maturity
NWC
= CA - CL
OCF
= EBIT - taxes + depreciation
FCF
= EBIT - taxes + depreciation - CapEx - ∆NWC
Net Working Capital
= current assets - current liabilities
Market Capitalization
= n * P
CapEx
= ∆NFA + depreciation
Book value of firm's assets today
net fixed assets + current liabilities + net working capital
Shareholders' equity is...
the residual value of a firm.
Marginal tax rate
the tax rate that applies to the next dollar of taxable income that a firm earns
Average tax rate
total tax paid divided by the total taxable income
Coupon per period = (7.4%, semiannual)
(.074 / 2) * $1000 = $37
US Marginal Tax Rate
35%
Which one of the following statements is correct? -Bond markets have less daily trading volume than equity markets. -There are less bond issues than there are equity issues. -Municipal bond prices are highly transparent. -Bond markets are dealer based. -Most bond trades occur on the NYSE.
Bond markets are dealer based.
FCF
Free Cash Flow From Assets
What is the primary purpose of bond covenants?
Lender protection
P
Market price
OCF
Operating Cash Flow
Which one of the following indicates that a firm has generated sufficient internal cash flow to finance its entire operations for the period?
Positive cash flow from assets (2.4)
Which one of the following will increase cash flow from assets but not affect the operating cash flow?
Sale of a fixed asset
n
Shares outstanding
Which one of the following types of bonds should an investor purchase if he or she is primarily concerned about ensuring that bond ownership will increase his or her purchasing power?
TIPS
Which one of the following terms refers to a bond's rate of return that is required by the market place?
Yield to maturity
Firms that compile financial statements according to GAAP...
can still manipulate their earnings to some degree.
Balance sheet
current assets + net fixed assets = current liabilities + long-term debt + shareholders' equity
Assets are listed in _____________ order of liquidity.
descending