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UT Dallas FIN 3320 - Exam 1 Study Guide

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FIN 3320 1st EditionExam # 1 Study Guide Chapter: 2, 3, 5 & 6Chapters 2 & 3 - Knowing the fve general components of a balance sheet: current assets, long term ‐assets, current liabilites, long term liabilites, and owners’ equity. Be able to calculate ‐one or more, given informaton about the others- Understanding the various components of current assets, current liabilites, and net working capitalo Net working capital = Current assets – Current Liabilites- Knowing which items on an income statement appear above (i.e., are parts of) operatngincome and which items are not part of operatng income but are part of net income … and calculatng operatng income, taxable income, or net income o Net sales – COGS – Depreciaton = EBITo EBIT – Interest Paid = Taxable Incomeo Taxable Income – Taxes = Net Income- Calculatng Operatng Cash Flow, as per the Cash Flow Identtyo OCF = EBIT + Depreciaton - Taxes- Calculatng Cash Flow from Assets, as per the Cash Flow Identtyo OCF – Net Captal Spending – Change in NWC = Cash Flow from Assetso Change in NWC = Ending NWC – Beginning NWCo Net Capital Spending = Ending Net Fixed Assets – Beginning Net Fixes Assets + Depreciatono Cash Flow from Assets = Cash Flow to Creditors + Cash Flow to Stockholderso Cash Flow to Creditors = Interest Paid – Net new Borrowingo Cash Flow to Stockholders = Dividends paid – Net new equity Raised- Dupont identtyo ROE is effected by three things Operatng efficiency Asset use efficiency Financial leverageo ROE = PM*TAT*EM- Being able to indicate whether, all else constant, a higher or lower value for any of the following ratos indicates that a frm is performing better or worse: current rato, accounts receivable turnover rato, inventory turnover rato, total asset turnover rato, net proft margin, return on assets, return on equity, and earnings per shareo Current Rato = Current Assets/Current Liabiliteso Receivable Turnover = Sales/Accounts Receivableo Inventory Turnover = COGS/Inventoryo Total Asset Turnover Rato = Sales/Total Assetso Net Proft Margin = Net Income/Saleso Return on Assets = Net Income / Total Assetso Return on Equity = Net Income / Total Equityo Earnings per Share = Net Income / Shares Outstanding- Being able to identfy sources or uses of cash among revenues, expenses, changes in asset account balances, changes in liability account balances, and changes in common‐stock balanceChapter 5- Compounding calculaton: future value (FV) of a single inital investmento FV = PV*(1+r)^t- Discountng calculaton: present value (PV) of a single future amount (or cash flow)o PV = FV/(1+r)^t- Calculatng/inferring the number of periods in the basic PV FV equaton‐- Calculatng/inferring the required return in the basic PV FV equaton‐- The relatons between interest rate, tme period and PV or FV.Chapter 6 - Convertng APR to EAR and vice versao EAR = [1+(quoted rate/m)]^m – 1o EAR = [1+ (APR/12)]^12 – 1- Calculatng the FV of a single, inital investment given the APR- Calculatng the PV of a level perpetuity o PV for a Perpetuity = C/r- Calculatng the PV of a growing perpetuityo PV for a growing Perpetuity = C/(r – g)- Calculatng PV of an annuity – cash flows can be of any frequency (monthly, quarterly, etc.)o PV for an Annuity = C*(1-[1/(1+r)^t]/r)- Calculatng the FV of an annuity – cash flows can be of any frequency (monthly, quarterly, etc.)o FV of an Annuity = PV of Annuity*(1+r)^n- Inferring the implied rate , # of payments, or payment amount in an annuity or perpetuity


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