Finance 301 Exam 1

liabilities and equity

ST loans, accounts payable, day-to-day financial activities

GAAP

Generally Accepted Accounting Principles. The standards and rules that accountants follow while recording and reporting financial activities.

efficiency, accountability, stake in the company, role of liberator

basic management tenets

proxy contest

bidder buys shares of target company, attempts to get other shareholders to vote their shares(through proxies) for their candidates for the board of directors

transaction costs

brokerage commissions, sales loads, 12b-1 and redemption fees, and yearly asset management fees

net income+depreciation+change in current liabilities-change in AR-change in inventories-change in fixed assets

calculation of net cash flow

assets

cash, accounts receivable, inventories

product/sevice markets

challenge of management- provide high quality products/services at competitive prices

capital markets

challenge of management-provide competitive return to investors

too much focus on markets and expectations, ST horizon (quarterly profits), issues with capital market (crisis, flash crash), financial scandals, and CEO compensation

challenges to the shareholder value standard

new paradigm

characteristics include: working capital is bad, reflects poor planning, use of funds, measure: working capital/sales, reduce inventory by changing processes and working with suppliers, timeliness of delivery may be more important thanprice, good purchasing includes terms, quality, and delivery, and the cost of not taking discounts is prohibitive

old paradigm

characteristics include: working capital is good (liquidity), measure:current ratio of 2.0, excess inventory adds valure to customers, the supplie is an adversary, key issue:lower prices

thrived in the past decade in terms of number and value of deals but the returns in the US have come back to public market equity returns-hit hard by covid with bankruptcies especially in retail, travel, and leisure-internatonally returns are still high-the number of value of PE deals is at the highest since 2008-2009 but has dropped a little in 2020 due to covid

describe the current state of the PE industry

crash and scandals, then growth with debt, financial crisis, then recovery with bumps

describe what happened in the US in 2000s

corporate control mechanisms

designed to insure that management acts in shareholder interests internal: board of directors, audited financial statements, stock value (based compensation), stock ownership interest external: hostile takeover(offer higher price for another firm's stock), proxy contest (gain control of another company's board), shareholder activism (large investor buys stake)

ease of formation, double taxes (corporation and investor)

disadvantages of corporations

taxes

dividends and long term capital gains=15-20% short term capital gains=ordinary income

no

do US Tresury Securities have default risk?

longer (10 mins)

do bitcoin transactions take a shorter or longer amount of time then credit card or ipay?

higher

do larger yield maturities get higher or lower returns?

less

do you use more or less debt with the relative degree of business risk, intangible assets, and financial slack?

more

do you use more or less debt with the tax shield, and tangible assets?

lower

does a utility typically have a higher or lower asset turnover than a grocery store?

smaller

does bitcoin have larger or smaller fees than a credit card or ipay?

earnings/profits

drives stock prices in the long run

asset allocation is a very important decision

eighth principle of finance, diversify investment holdings over an array of asset classes: cash and short maturity deposits or securities, fixed income securities and bonds, and common stock-most important:stocks, bonds, and cash allocation

agency costs

expenses and investments that serve management's interests and not shareholders small scale:management perks large scale:large investments, especially acquisitions

matching principle

expenses incurred in providing a good or service are recognized in the period that the sale is made

corporate managers should make decisions that max shareholder value

fifth principle of finance, managers have a fiduciary responsibilty to act in shareholder's interest

treasury

finance cfo activities-financial planning, capital budgets, ST and LT capital requirements, cash management, and working capital - traditional

higher returns require taking more risk

first principle of finance, safe investments have low returns, positive relationship between risk and returns

supply and demand drive stock prices in the short run

fourth principle of finance, stock buying and selling is driven by news regarding the overall market, industry or sectors announcements and reports, and company events and announcements

store of value

function of money- money must be able to be reliably saved, stored, and retrieved- be predictably usable as a medium of exchange when retrieved-value must remain stable overtime- bitcoin has high volatility and acceptance is unknown in future due to unpredictability

unit of account

function of money- standard monetary unit of measurement of value/cost of goods, services, or assets-lends meaning to profits, losses, liabilities, or assets-bitcoin fairs poorly because not generally accepted

medium of exchange

function of money-intermediary used in trade to avoid the inconviences of a pure barter system- to be widely acceptable it must have stable purchasing power (value) and therefore should possess: value common assets, constant utility, low cost of preservation, transportability, divisibility, recognizability, resistance to counterfeiting, high market value in relation to volume and weight,- gov doesn't get involved with bitcoin so less complications but volatility of value when compared to the USD

high asset turnover

grocery stores tend to focus on which performance metric?

operating income (profit after accounting for all business expenses)

gross income-SGA-RD-depreciation= what on the income statement?-measures overall profitability and health of a business

the finance environment

had lots of growth and volatility which results in stress

behavioral finance

investor psychology is examined- investors aren't always rational, emotions play a factor, markets aren't always perfectly efficient and should be managed because it reflects these emotions and biases- stock traders firmly believe this

exxon

invests most in their plant

yes

is depreciation a source of cash?

poison pills

used to make a stock unappealing to others by making a takeover extremely expensive- give current shareholders the right to purchase shares of the company at a bargain price, contingent on another firm acquiring control-dilutes the stock and makes a stock acquisition not economically feasible

70

what % of capital for a typical firm is generated internally from operations?

90

what % of capital from markets is raised through debt?

35

what % of debt is average?

dividends

what are cash payouts to investors (quarterly),and are expected to be maintained by companies?

junk debt/ high yield

what are ratings from double B and down called?

investment grade

what are ratings from triple B and up called?

depreciation (asset value as expense but no physical check given out), matching costs with revenues

what are some noncash items on the income statement?

fixed vs variable costs, product cost (RM, DL, and OH), and period costs (selling general admin)

what are some time and cost items on the income statement?

interest is tax deductible, retain control, and is cheaper

what are the advantages of raising debt with capital?

carrying and shortage

what are the costs of holding current assets?

dilutes ownership interest and its more expensive than debt

what are the disadvantages of using common stock to raise capital?

working capital management, capital budgeting, and capital structure

what are the key ftrategic financial decisions for a company?

warehousing and capital

what are the two biggest costs of maintaining inventory?

ratios

what are used to track trends?

accounting and auditing

what bent the rules in 00s because it was needed to keep clients? (Arthur Andersen)

companies tried to keep up with wall street expectations

what caused the crisis in corporate governance in 2000s?

volatility

what characteristic of bitcoin is driven by media reports, hacks, exchange failure, legal issues, China, competitors, security issues, wild speculation, illegal transactions and tech issues?

ge

what company had a 22 B non cash charge in its slumping power division tied to acquistions, and cut its dividends?

moody's- standard's and poor's

what company receive fees to rate the bonds of companies and gov and these ratings are used to indicate the probability of default?

enron

what company was named the most innovative company?

wall street analysts

what contributed to the corp gov crisis in 00s because they had biased stock recommendations and was only aimed at bringing in new business?

lending club

what corp sold investor 22M in faulty loans and altered 3 M of those loans to comply?

minimum cost

what cost occurs at the point where the carrying costs=shortage costs?

carrying

what costs are easy to measure, include capital costs (costs of funds invested), includes inventory costs (warehousing, insurance), includes bad credit costs (A/R), and increase with an increase in current assets?

shortage

what costs are tough to measure, include stock outs (run out of inventory), includes sales (tight credit limit sales), and decrease with an increase in current assets?

executive compensation

what crisis in corp gov (00s) that was dominated by stock options and included incentives to keep stock price up?

tender offer

what devito did for company shares which eventually turned into a proxy fight-where a bidder company offers to buy shares of a target company from shareholders, usually at a premium

add to pay dividends or buy back debt or equity

what do companies do when the cash flow from operations- cash flow from investing(acquisitions) is positive?

issue debt or equity

what do companies do with excess cash when cash flow from operations-cash flow from investing is negative?

capital

what do companies need for growth?

private companies, buyouts of public companies (result in the delisting of public equity), private debt, and real assets (especially in real estate and natural resources)

what do the funds and investors the make up private equity firms directly invest in?

capital intensity and barriers to entry

what economic forces act on ROA?

accounting entries

what effects the income statement but not the statement of cash flows?

low degree of managerial stock ownership

what failure of internal control mechanisims made managers less likely to think like investors? (80s)

corporate raiders

what failure of internal control mechanisms included people such as t. boone, pickens, carl icahn, victor posner, robert bass, and robert pearlman- they bought out stake in company to force changes and sell out (more leverage, sell assets)? (80s)

unfair corporate voting procedures

what failure of internal control mechanisms included proxy solicitation procedures, access to stockholders, and nonconfidential voting? (board members and management) (80s)

diffusion of stock ownershhip

what failure of internal control mechanisms reduced stockholder influence in corp gov issues-costs of monitorin management performance was too high? (small investors)(80s)

easy financing

what failure of internal control mechanisms was known as "junk bonds" and was practiced by milken and burnham? (80s)

profit margin and return on equity

what financial metrics does Buffet use in his analysis of companies?

lehman brothers

what global financial services firm hid 50B loans as sales by selling toxic assets and got caught by going bankrupt?

borad's role changed(CEOs fired for poor performance), debate over executive compensation (management pay vs. performance and issue of management stock ownership), institutional investors became more involved in corp gov issues (proxy rules changed (voting), shareholders communication permitted, and move to shared governance)

what happened in the 1990s in regard to corporate governance issues? (3 improvements)

8 years of growth then bust in 2000s

what happened in the 1990s in the US? (how many years of growth/ when did it bust?)

commodity, stock, bond, and currency markets

what instantly impacts markets around the globe?

operation profit

what is EBIT (earnings before interest)?

games accountants play

what is GAP-actions or omissions intended to hide or distort the real financial performance of a business?

expected growth

what is a company's P/E ratio primarily driven by?

customer pays the company before the company pays the supplier

what is a negative ccc?

R&D expense

what is an investment in research, ideas, and innovations that is expensed on the income statement?

current assets, tangible (PP&E-net accumulated depreciation), and intangible (Goodwill-mainly from acquisitions)-listed at book value

what is included on the asset side of the balance sheet?

current liabilities, LT debt (bonds), common equity (previous sales of stock and reinvested earnings)

what is included on the liabilities and equity side of the balance sheet?

cost of capital

what is one of the most fundamental concepts in finance, used to measure economic volatility of corp investments, and management seeks to minimize it through financial strategy?

free cash flow

what is sometimes a better measurement of corporate performance than reported earnings?

no fixed financing obligation

what is the advantage of using common stock to raise capital?

high stock price and shareholder value

what is the best defense from acquisitions?

7%

what is the common growth rate including GDP, sales, profits, and EPS?

incur a fixed financing obligation in the form of interest and principle payments which can lead to financial distress

what is the disadvantage of raisng debt with capital?

40%

what is the dividend payout ratio of the S&P 500?

2%

what is the dividend yield of the S&P 500?

corporate capital expenditures

what is the driving force and extremely sensitive to the economy?

capital budgeting

what is the evaluation of an investment in LT assets to fuel growth? (including capital expenditures (tangible) and R&D (intangible))?

hands-on investment

what is the key element of PEs that states that PE firms must overhaul how a business is mananged- In early years it was brute-force cost-cutting, and layoff-now: PE employs enhanced management and operational strategies and reorganizations with the aim of leaving the company better off then they found them-acquisitions need financing to grow so the PE industry has been at the forefront of the financialization of the economy?

leverage

what is the key element of PEs that states that acquisitions are typically financed with a lot of deby that ends up being owed by the acquired company-PE firms can put in a comparatively small amount of cash, magnifying gains if they sell at a profit?

fees

what is the key element of the PE that states the these changed by PE are huge-money managers are lucky to get 1% of assets a year-traditional ="2 and 20"- 2% annual this and 20% of profits above a certain level - 20% part is known as the carried interest and is especially lucrative because it gets favorable tax treatment?

fraud

what is the main shenanigan?

financing activities

what is the net cash flow from sources of funding?

investing activities

what is the net cash from investments in or disposition of fixed assets or acquisitions?

operating activities

what is the net cash generated from selling a product or service?

cash conversion cycle

what is the number of days from when you pay the supplier to when you get paid by the customer?

operating activities

what is the primary source of cash?

yield curve

what is the relationship between the yield-to-maturity and time-to-maturity on US Treasury Securities, has a positive slope, and indicates the base cost for LT capital in the economy?

financing activities

what is the statement of cash flows balanced with?

ex date

what is two business days before the record date and as of this date stock does not include the dividend and you must own stock as of close on day before sales and is the stock opens at previous close minus dividend?

stock splits

what is when a company divides its existing shares into multiple shares, has no impact on stock value in theory, may signal that management expects higher stock prices, has declined over the years, and usually shows large growth before and then levels out after?

stock repurchases

what is when you use cash to buy back shares, another way to return cash to investors, usually viewed positively, reduces cash and equity, increase ROE and EPS, have overtaken dividends, doesn't commit a company to a dividend, many are poorly timed, and go up in up markets and down in down markets?

aig

what multinational insurance company proved SOX did not always work, had massive acctg fraud along with bid rigging and stock manipulationby booking loans as revenue and was caught by SEC regulator?

net income

what must businesses grow faster than sales?

fundraising

what part of the PE process comes from outside financial sources, such as pensions, wealthy individuals, or other larger funds to help raise capital for investment in private companies?

sourcing deals

what part of the PE process finds investment opportunities that align with the professional expertise of the firm and investment criteria?

exiting

what part of the PE process is the investment through a sale of company to other entities, initial public offering, or liquidation?

creating value

what part of the PE process is through targeted acquisitions, process engineering, reduction of overhead and other expenses, and targeted consulting to improve efficiency, growth, and profitability?

20

what percent of ceos say they may use accounting adjustments to meet earnings estimates?

revenue recognition

what practice accounts for 2/3 of primary accounting issues?

liquidity

what ratios are of most interest to suppliers and bankers?

common size balance sheet

what sheet shows all asset accounts expressed as a percentage of total assets and liabilities and equities as a percentage of total liabilities and equities and helps businesses look for trends over time and compare with other stores?

fail to record/disclose all liabilities

what shenanigan includes failing to record expenses and related liabilities when future obligations remain, recording revenue when cash is received, yet future obligations remain, management engages in transactions to keep debt of the book: FASB attempting to correct swaps, in-substance defeasance of debt, defined benefit pensions, operating leases, subs and joint ventures, and special pupose entities when a firm incurs a liability if it has an obligation to make future sacrifices?

no

is the validity of bitcoin certain?

equity capital markets

issue stock, allocator of risk capital, essential to finance econ growth, barometer of econ health

walmart

leads us in sales

wells notice

letter sent by SEC to prospective respondents notifying him of charges that the regulator intends to bring against the respondent and giving the respondent the opportunity to submit a written statement

personal assets: house, life insurance/pension,bank deposit, equity liabilities: debt financial crisis lowered financial conditions for households

list the assets, liabilities, and financial crisis result for aa household balance sheet

admin control, resource allocation, management stewardship

list the basic accounting concepts

accounting statements and ratios, pv, risk and return models, and spreadsheet modeling

list the contents of the financial decision tool box

revenue recognition, fraud capitalization, and failure to record liabilities

list the primary accounting issues

debt issue

low interest rates and high credit rating-low borrowing rates-cheaper than bringing offshore cash back to states due to taxation

investors, community, suppliers, employees, creditors, customers, analysts, gov.

major external stakeholder groups

board of directors, management, employees

major internal stakeholder groups

finance

management of money

capital structure

managing financing mix between debt and equity-goal: to minimize the cost of capital and to enhance performance (liability management)

capital budgeting

managing investments in long-term assets- goal: to allocate capital to investments offering the highest risk adjusted returns

beta

measure of risk and volatility of a stock relative to the stock market: greater than 1 is more risky and less than one is less risky

standard deviation

measure of risk, larger=more risk

increase inventory turnover high

monitor in depth product category and unit aging with software to determine which products to liquidate results in

walmart

most inventories

shareholder's equity

net worth, common equity, stakeholder's equity

asset diversification will reduce risk

ninth principle of finance, spread investment over different stocks to reduce risk

diluted EPS

number of shares outstanding + shares part of executive compensation= what wallstreet looks at-also equals (net income- preferred dividends)/sum of the weighted average number of shares outstanding

profit before taxes

operating income-interest expense = what on the income statement?

classic deals in the 80s

pickens:Gulf icahn:TWA pearlman:Revlon

53

price for barrel of oil (WTI)

1900-2,000

price of gold per ounce- fear index

deferred taxes

primary source results because companies can use straight line depreciation on assets in determining net income and accelerated depreciation on assets for tax purposes- results in a timing differenct for taxes-provides lower tax current bill, but these taxes will eventually need to be paid when the accelerated depreciation falls below the straight line depreciation- usually placed under liabilities

mining process

process that bitcoin follows-open source-controlled supply-record keeping service-keeps blockchains consistent and unchangeable-prood of work required for acceptance- controlled supply associated with increased difficulty-limits new blocks every 10 mins

residual claim

profit after tax-whatever's left over

net income (profit)

profit before taxes-taxes = what on the income statement?

fixed assets

property, plant, and equipment

long term assets

property, plant, and equipment-invest in for growth

golden parachute

provides compensation to top-level executives in the event of a change of corporate control

debt capital markets

raising capital by issuing bonds interest rates reflect the base cost of capital in economy

inflation

reduces value of future dollars you receive on your investment and reduces your real return on investments

balance sheet

reports, as of a certain time, the resources (assets), obligations (liabilities), and equity of owners

statement of cash flows

reports, for a certain interval, the amount of cash generated and consumed by a company through operating, financing, and investing activities

income statement

reports, for a certain interval, the net assets generated through business operations (revenues), net assets consumed (expenses), and net income

goodwill

results when one company is purchased by anothers and the amount the acquiring company pays for the target company is over the target's book value-reflects the value of the company's brand name, customer base, good customer and employee relations, and any patents or proprietary tech

revenue recognition

revenue is recognized when a good/service is provided

gross income (profit)

sales-cogs= what on the income statement?

efficient capital markets are tough to beat

second principle of finance, stock market is brutally efficient, current stock prices reflect all publicly available info, and stock prices react completely, correctly and almost instantaneously to new info- useless to forecast future prices by technical analysis and fundamental analysis-impossible to beat

lowers outstanding inventory

selling older inventory results in

the agency problem

separation of ownership and contol (asset)

time and value of money are closely related

seventh principle of finance, a dollar today is worth more than a dollar tomorrow, compare pv with fv by accumulating and discounting to asses if the investment is worth it

transaction costs, taxes, and inflation are your enemies

sixth principle of finance, these enemies reduce investment returns

market cap

the aggregate market value of a company= shares*price per share- important in growing, investing, acquiring, and compensating

high shareholder value and stock price

the best defense from acquisitions

rational investors are risk averse

third principle of finance, rational investor takes small risks but tries to avoid more risk

shift future expenses to the current period

what shenanigan includes management accelerating discretionary expenses into the current period: prepayment of operational expenses, improper write-off of inventory which lowers current earnings so as to increase future earnings, management has the firm 'take the big bath': new management often writes-off old projects to relieve future periods of the expenses, large nonrecurring gains offset with large expense or vv, and decreases future expenses to increase future profits when the firm is supposed to charge expenses against income in the period in which the benefit is received?

shift expenses to a later period

what shenanigan includes management improperly capitilizing costs: start-up costs, r&d costs, advertising expenditures, and admin costs, management depreciates or amortizes costs too slowly: excessively long amortization periods, increases in depreciation/amortization schedule and results in an increase in current profit when you should only capitalize costs that produce a future benefit and expense those that produce no such benefit?

boosting income with one time gains

what shenanigan includes management selling undervalued assets, including investment income or gains as revenue or reduction in operating expenses whe really gains should be reported only after an exchange has taken place?

shift current revenue to a later period

what shenanigan includes managemnt deferring recognition of revenue through unearned revenue, management creates reserves to shift income to a later period (cookie jar reserves-smooth income), and increases future revenues and profits when a firm is supposed to record revenue/expenses in the period in which it is earned?

recording bogus revenue

what shenanigan includes recording cash received as revenue, recording sales laccking economic substance (wash sales- trade back and forth)?

recording revenue too soon

what shenanigan includes shipping goods before sale is finalized, billing in advance, shipping defective goods, using an aggressive revenue approach (LT licenses), recording when future services are still due(enron-operation braveheart)?

common size income statement

what statement shows all accounts expressed as a percentage of net sales and provides insight?

customer focus and commodity items

what strategic forces act on ROA?

mezzanine financing

what strategy of PE includes investment for certain companies that are in need of interim financing in form of subordinated debt or preferred stock?

distressed investing

what strategy of PE is aka turnaround and is where capital is allocated to companies in this category are typically bought in or near bankruptcy with declining finances?

leveraged buyout

what strategy of PE uses large amount of debt to finance(buy) the deal with expectation that a mature company will generate enough cash to pay off large amount of debt?

static trade off theory

what theory states that there is a trade off between tax savings and financial distress costs of debt?

insurance companies

what type of companies does Warren Buffet like to invest in?

grocery stores, retail, and commodity items

what type of products experience high asset turnover?

utilities and luxury items

what type of products experience high profit margins?

positive

what type of relationship does expected EPS growth and the P/E ratio have?

positive

what type of relationship does performance (return on equity) and the P/E ratio have?

negative

what type of relationship does risk (size and volatility) and the P/E ratio have?

19,666

what was the highest value of bitcoin?

hostile takeovers

what was the solution to corporate governance issues in the 1980s?

shared governance between management and board and large investors

what was the solution to corporate governance issues in the 1990s?

serbanes-oxley act

what was the solution to the corp gov crisis in 00s?

early 2000s (enron), financial crisis-ratings of mortgage bonds issues, 2011-downgrade of USAs AAA bond rating, regulation, and US sued S&p for ratings

what were some issues with the bond offerings of Moody's?

early-stage venture capital

whcih strategy of PE includes investments that are equity stakes in new and unproven business models?

white knight

when a target company looks for another friendlier company to acquire it- current shareholders may also receive greater after-tax market value of securities if the deal is a "tax-free" exchange of stock

ROI>COC

when should companies invest in a project (yields +NPVs)?

2008

when was the first bitcoin introduced?

new investors

where are the proceeds that investors are paid in a ponzie scheme from?

balance sheet

where do capitilized expenses go?

markets

where else is capital raised other than operations?

minimum cost

where is the tax advantage of debt equal to the cost of financial distress?

investment

which basic corporate financial decision involves allocating scare resources across competing uses?

financing

which basic corporate financial decision involves raising funds to finance these projects?

dividend

which basic corporate financial decision involves returning funds to investors?

heinz

which company was recently taken over by a private equity group?

anglo-american

which global odel of corp gov has minority shareholders with board which are elected to represent shareholder interests? (takeovers in 80s)

fluid capital

which model is a subset to the anglo-american in which capital flows to firms with best prospects to create shareholder value?

japan-germany dedicated capital

which model of corp gov has large equity holders that procide oversight, very few takeovers, equity is not sold which may result in issues, includes a hausbank(db) which is a major provider of debt and equity capital and is on a supervisory board, and includes kierstu (combo, mitsubishi) where companies are in business together and own each other's common stock?

rest of the world

which model of corp gov has majority equity owners that oversee management? (temasek holdings-singapore gov owns 53% shares)

profitability ratios

which ratios are also known as operating ratios, vital in assessing managers' performance, and include GM,OM,PM,ROA, and POE?

valuation ratios

which ratios determine value investors place on a company and includes the P/E ratio and market cap?

activity ratios

which ratios include asset turnover ratio (higher is better), asset utilization ratios, measure how well firm uses productive resources, related to amount of sales generated per dollar invested in a particular asset, related to receivables, inventory, and total assets, and includes TAT,IT,DSI,ART,DSO,and FAT?

liquidity ratios

which ratios measure a firm's ability to meet short-term obligations, closely related to size and composition of working capital position, and other things equal, higher working capital implies more liquid position?- includes cr and qr

financial leverage ratios

which ratios measure risk focusing on financing mix, examine extent to which firm uses debt to finance operations, examine balance sheet: higher this result in higher risk, examine income statement: coverage ratios, and include APT,DPO,TIE,D/E. and LM?

activity

which ratios measure the efficiency of management?

growth equity

which strategy of PE includes investment in companies that are young and positioned for growth but more established then ESVC?

Tesla, galactic, overstock

who accepts bitcoin? (3 in s&p 500)

g: stakeholders d:stockholders

who are greg peck and danny devito talking to?

amazon

who has the largest R&D budget?

toyota

who has the largest capital expenditure?

caterpillar

who has the longest operating cycle?

citigroup

who has the most debt? (financial firms)

chipotle

who has the shortest operating cycle?

ivan boesky

who is gordon gekkos greed speech based on?

apple

who is ranked as having the most efficient supply chain in the world, vertically integrates, upgrades facilities, and increases in-house operations?

home depot

who is the largest home improvement retailer, sells a wide assortment of building materials, home improvement products, and lawn and garden products, and had about 2284 stores in 2017?

apple

who is worth the most?

limited partner

who own 99%shares in a company and has limited liability?

general partner

who owns 1% of shares and has full liability and is responsible for execution and operating the investment and selects investments, negotiates terms, arranges debt financing, and manages the investment in a PE firm?

ceos and activist investors

who replace devito in the public's eyes?

mcdonald's

who serves 1% of the total world population daily, simplifies supply orders, price plans, and uses 'cold chain management'?

board of directiors

who was not overseeing management and wasn't independent in the 00s resulting in crisis in corp gov?

government

who was to blame for the 2000s financial crisis because of their lax regulation and oversight, promotion of home ownership, low interest rates, and missed housing bubble?

individuals

who was to blame for the financial crisis due to their greed and overbuying of houses?

wallstreet (institutions)

who was to blame for the financial crisis due to their tax underwriting standards on mortgages, promotion of risky products, excessive leverage and risk taking, and poor risk management?

dell

who's ccc is iconic?

justice dept and sec

whos lack of enforcement and transparency contributed to the corp gov crisis in 00s and was unable to keep up?

lower cost component structure

why are current profit margins at an all time high?

aimed at increasing the value of the firm and stock price

why did companies start to focus on shareholder value?

influence stock, outside and inside pressure to hit earnings benchmarks , influence exec compensation, and senior managers fear for their career

why do companies cook the books?

take advantage of low short term interest rates

why do companies offer floating rates?

to meet wallstreet expectations

why do companies participate in the primary accounting issues?

interest payments are tax deductible

why do firms choose to raise capital with debt?

investors believe these are +NPV projects

why do stock prices increase when companies announce capital investment plans?

companies are expected to maintain dividends (the news itself)

why do stock prices increase when firms announce increases in dividend payments and decrease when firms announce decreases in dividend payments?

stock buy backs

why does home depot have negative equity?

take advantage of positive conditions in financial markets and increase the share buyback program

why is convertible bond offering done?

partnership

you and your friend start a business-more difficult to form, profits taxed as inc, more difficult ease of transfer,liable for liabilities, and difficulty in raising capital

sole proprietorship

you start a business- easy to form, profits taxed as income, difficult transfers, liable for liabilities, difficulty raising capital

serbanes-oxley act

2002- CEOs must sign off on financial statements- management is accountable for accuracy of financial statements- audit committees must be composed of outside directors-companies cant make loans to directors

aggressive accounting

A forceful and intentional choice and application of accounting principles done in an effort to achieve desired results, typically higher current earnings, whether the practices followed are in accordance with GAAP or not

income smoothing

A form of earnings management designed to remove peaks and valleys from a normal earnings series, including steps to reduce and "store" profits during good years for use during slower years

activist investors

An individual or group that purchases large numbers of a public company's shares and/or tries to obtain seats on the company's board with the goal of effecting a major change in the company-making it more valuable- once they own 5% of shares, a sec 13-d form must be filed-normally follows a period of poor performance- examples:icahn (caesars and highest in 2020=occidental), singer(runs elliot management corp-roundup) and rosenstein(runs jana partners- jack in the box and whole foods)

creative accounting practices

Any and all steps used to play the financial numbers game, including the aggressive choice and application of accounting principles fraudulent financial reporting, and any steps taken toward earnings management or income smoothing

stockholders

(the owners) have residual claim on the firm's cash flow-no contract to get paid

net change in cash

CFO+CFI+CFF=

operating cycle

DSI + DSO=?

11,500

NASDAQ level (tech and small stocks)

earnings management

The active manipulation of earnings toward a predetermined target, which may be set by management, a forecast made by analysts, or an amount that is consistent with a smoother, more sustainable earnings stream

crown jewels

When threatened with a takeover attempt, the target company may sell off some of its major assets

corporations

a legal entity which serves as nexus of contracts, state chartering process (delaware), became dominant with industrial revolution

controller

accounting cfo activites- financial statements and reports, financial systems, operating budgets, audits, and taxes-traditional

elements of the new environment

advances in info systems and telecommunication tech, growth in trade and direct investment, deregulation and growth of global markets, greater economic volatility and risk, new complex financial instruments, institutionalization of markets, new markets and financial institutions, net result: global focus on financial markets

transferred directly (p2p), lower fees, accounts cant be frozen

advantages of bitcoin?

limited liability, ability to raise capital, ease of transfer

advantages of corporations

stakeholder

anyone who has an economic interest in a corporation-employees, customers, communities, lenders, suppliers, and stockholders- protected

no

are dividends a cash flow from investment activities?

under

are you allowed to include one time gains under or above the operating line?

declines

as debt increases what happens to the cost of capital because interest is tax deductible?-at first

increases

as debt increases what happens to the cost of financial distress and risk, causing the cost of capital to follow?-as time goes on

separation

assets owned by stockholders but controlled by management

15%

average roe of the s&p 500?

cfo expanded roles

corporate communicator with markets, financing and capitalization (insure that capital is available to fund strategic plan), risk management, strategy, growth, and acquisitions

1.5%

current 30-year treasury yield-base cost of capital for US companies

pier 1 poison pill vs aiden global capital llc mens warehouse vs joseph bank pac man sothebys enacts poison pill

current examples of defense mechanisms

company buyouts

current examples of this include elliot management and barnes and noble, bain capital focused on these, blackstone bought logistic assets from singapore based investment manager glp to sell to amazon, apollo, ifm, and advent

28,000

current level of DJIA-best known stock market index

funds flowing into funds run by activist investors have grown significantly in recent years, ST stock goes up 6% immediately, and LT includes better performance-all positive changes

current trends with activist investors

106/1.2

current yen/dollar and euro/dollar

random walk hypothesis

day to day stock prices are independent or a succession of random moves- future prices are unpredictable making fundamental and technical stock analysis useless

buy back shares

how can you grow EPS faster than net income?

expedite collections from customers, increase IT, lengthen payable period

how can you improve the ccc?

earnings dont correlate with cash flows, earnings deviate from company's peers or the norm. sudden changes in reserves, earnings growth is too consistent and large and frequent one time gains

how can you spot earnings mismanagement?

Sherri Watkins

how did enron get caught?

kept huge debts off balance sheet

how did enron's (commodities, energy, and service) shareholders lose 74 B, employees and investors lose their retirement funds, and employees lose their jobs?

unprofitable operations

how did saturn bankrupt GM?

return on investment is greater than the cost of capital

how does management create shareholder value?

3 cents

how much was one bitcoin originally worth?

low

if you have high return investments, are dividends low or high?

fraudulent financial reporting

intentional misstatements or omissions of amounts or disclosures in financial statements to deceive users that are determined to be fraudulent by an administrative, civil or criminal proceeding; often called management fraud

(pT-pT-1+d)/pT-1

stock return formula

wallets

stores info to transact bitcoins- connected to blockchain transaction ledger- stores the digital credentials for bitcoin holdings

days payable outstanding

sync info systems with over 1000 vendor partners to prevent mismatches on inventory orders lowers what

self-tender offer

target company agrees to purchase some of the current outstanding shares from its shareholders usually at a price above what the acquiring company is offering

PacMan

target company employs a counter-takeover bid for the aggressor - will announce that they are acquiring the aggressor and make advances to do so

an asset pricing model should be used to value investments

tenth principle of finance, CAPM estimates the rate of return an investor should expect to receive on a risky asset

working capital management

the managing of short-term assets and liabilities-financial position of the firm- goal: to minimize the amount of capital required to achieve the company's objective

corporate governance

the system of rules, practices, and processes by which a company is directed and controlled-battles often result from companies not being managed in the interest of the owners-many of these battles involve corporate control including hostile take-overs and proxy contests

greenmail

the target company purchases the acquirer's shares at a premium over the market price

blockchain tech

the technology in bitcoins that keeps a list of recods-decentralized public ledgers that cant be altered-hold batches of transactions, which are linked to prior transactions (chains)