Chapter 1-3 Key Terms

Study Flashcards

15 Cards in this Set

Front	Back
Simple interest	Interest calculated only on principal (investment amount) Principal * Rate * Time calculated each year
Compound interest	Calculated in principal + accumulated interest; each yr adds on (Principal + Interest [1]) * Rate * Time
Capitol Cost	OE/ debt + OE debt/ OE+debt
Tax Shield from depreciation	Depreciation x tax rate
Tax and gains	Sale price- value= gain gain x tax rate= tax paid on gain sale price-(add is at a loss) tax paid on gain= after tax inflow
Cash inflows after tax	Estimated cash inflow- (estimated x tax)= after tax inflows
Callable stock	Preferred stock that allows the company to buy it back at a certain price
Convertible preferred stock	Preferred stock that giver shareholders the freedom to convert their share into other forms of capital
Cumulative Stock	Accumulates unpaid dividends over time
Participating preferred stock	Allows preferred shareholders to receive excess of the stated dividend rate
Date of declaration	Announcement to pay put dividends
Date of payment	Date when company formally pays share holders
Date of record	Company reviews records to ensure shareholders eligibility to receive dividends
Capital budgeting Process	Investment opportunities Select appropriate investment Financing Evaluating
Rate of return	Dollar amount of return on investment/ dollar amount if initial investment