HB 311: Chapter 3 Terms
24 Cards in this Set
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Who interprets information about companies and makes recommendations to investors?
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Financial Analysts
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What is a firm's primary source of financial information?
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Annual Report
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Who are annual report's biased to?
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Management
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What 3 activities is the statement of cash flows concerned with?
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Operating, Investing, and Financing
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What type of activity occurs when a company borrows money, pays off loans, sells stock, or pays dividends?
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Financing Activities
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What type of activity occurs when a firm buys or sells fixed assets or long-term purchases/sales of financial assets?
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Investing Activities
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Have to do with running the business on a day-to-day basis
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Operating Activites
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What activities deal with capital accounts, long-term debt, and equity?
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Financing Activities
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What is more important: cash or net income?
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Cash; a company can still go out of business even if they are earning an accounting profit
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Cash available for distribution to common stockholders
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Free cash flow (which means cash is generated beyond reinvestment needs)
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Which statement presents each line item as a percent of revenue?
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Common size income statement
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What are the 5 classifications of ratios?
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Liquidity, asset management, debt management, profitability, and market value
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What do liquidity ratios measure?
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Ability to meet short-term financial obligtions
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What do debt management ratios show?
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How effectively the firm uses other people's money and whether it's using too much borrowed money
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What do asset management ratios show?
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How the company uses its resources to generate revenue/profit and to avoid costs.
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What do profitability ratios show?
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How successful the venture is in making money
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What do market value ratios show?
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How investors feel about the future of the company
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What do asset management ratios show?
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How the company uses its resources to generate revenue/profit and to avoid costs.
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What type of ratios are: current assets & quick ratio(acid test)
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Liquidity Ratios
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Average collection period (ACP), inventory turnover ratio, and fixed/total asset turnovers are what type of ratios?
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Asset Management Ratios
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Times Interest earned (TIE), cash coverage, and fixed charge coverage are what types of ratios?
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Debt Management Ratios
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Return on sales (ROS), Return on equity (ROE), and Return on assets (ROA) are what type of ratios?
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Profitability Ratios
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P/E and market to book value are what type of ratios?
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Market Value Ratios
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What do Du Pont equations express?
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Relationships between ratios that give insights into successful operations
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HB 311: Exam 1