Fina 3770 Final Exam Study Guide

Business organization types

- Sole proprietorship - General Partnership - Limited Partnership - Corporation / C Corporation - S Corporation - LLC - Limited Liability Company - LLP - Limited Liability Partnership - Joint venture

Key features of preferred stock

1. Fixed Dividend 2. Convertibility 3. Votability 4. Yields

Constant Growth Model Inputs

1. Growth rate dividend per share 2. Required rate of return 3. Dividend per share

Key features of Classified stock

1. Higher Dividend 2. Fixed Rate 3. Early payment than others

Key features of Common stock

1. Stock Represents Ownership 2. Voting Rights 3. Common Stock value 4. Attending Board Meetings.

Income Statement

A financial statement showing the revenue and expenses for a fiscal period.

Balance sheet

A financial statement that reports assets, liabilities, and owner's equity on a specific date.

Preferred Stock

A preference share are those type of shares which have fixed dividend and whose payment takes priority at the time of liquidation than other such as equity etc.

Cash Flow Statement

A summary that shows total income and spending for a given time period

The Stock market

A system for buying and selling shares of companies

Careers in finance

Commercial Banking Corporate Finance Financial Planning Insurance Investment Banking Money Management Real Estate Hedge Funds Private Equity

I

Interest Rate per period

Types of Financial Institutions

Investment banks Commercial banks Financial services corporations Credit unions Pension funds Life insurance companies Mutual funds Exchange traded funds Hedge funds Private equity companies

Liquidity or Solvency Ratios

Measure(s) the ability of the firm to pay its debts as they come due

Profitability Ratios

Measures of the operating success of a company for a given period of time.

Types of Financial markets

Primary markets and secondary markets

Constant Growth Model Formula

P0 = D/(k-g)

PMT

Payment, the annuity payment.

Market Value Ratios

Ratios that relate the firm's stock price to its earnings and book value per share.

Goals of the corporation

Stockholder wealth maximization Managerial incentives to maximize shareholder wealth Social responsibility Stock price maximization and social welfare

Non Constant Growth Model

This model is also known as Walters Model. This model shows the clear relationship between the internal rate of return and Cost of capital of the firm in determining the Dividend policy

Constant Growth Model

also known as Dividend discount model ( DDM) is a method which are used for calculating the intrinsic value or fair value of shares. This value the present value of future dividends.

Do Pont system

analysis is a technique used to decompose return on equity (ROE) into different parts. The ROE is used to assess the profitability and performance of the company.

Financial institutions

entities that provide financial services, such as taking deposits, managing investments, brokering financial transactions, or making loans

Financial markets

financial institutions through which savers can directly provide funds to borrowers

FV

future value

Beta

indicates whether Investment is more or less volatile than the market as a whole.

Common Stock

is a stock as well as a security which represents ownership in company and exercise voting right

FCF Model

is equal to cash flow from operations and from business minus operating as well as non operating expenses

Bond's Key Features

issuer, maturity, par value, coupon rate and frequency, and currency denomination.

Secondary Market

market for reselling financial assets

Primary Market

market for selling financial assets that can only be redeemed by the original holder

Financial Leverage or Debt Ratios

measure the firm's ability to pay long-term debt and liabilities It uses firms long-term liabilities in the ratios

N

number of payments

Amortization table

payment, interest paid, payment of principal, remaining balance

PV

present value

Asset Efficiency or Turnover Ratios

the efficiency with which the firm uses its assets to produce sales.

What is finance?

the system that includes the circulation of money, the granting of credit, the making of investments, and the provision of banking facilities

Classified Stock

those stock which are divided into more than one class of the common stock