The Four Basic Areas: Corporate Finance, Investments, Financial institutions, International Finance.
Agency problem- inherent conflicts of interest
Assets=Liabilities + Shareholders’ Equity, Income =Revenues – Expenses, Current Ratio=Current Assets/Current Liabilities, Quick ratio or acid-test ratio= (Current Assets – Inventory)/ Current Liabilities Cash Ratio= Cash/ Current Liabilities Total debt= (Total Assets- Total Equity)/ Total Assets, Debt/equity ratio= Total Debt/ Total ...view middle of the document...
5 days/ Receivables turnover ,Payables turnover ratio= 365 days/ (cost of Goods Sold/ Accounts Payable) ,Total asset turnover= Sales/ Total Assets ,Capital intensity= Total Assets/ Sales ,Profit Margin= Net Income/Sales, Return on assets (ROA) = Net Income/ Total Assets, Return on equity (ROE) = Net Income/ Total Equity, Price- Earnings (PE) = Price per Share/ Earnings per Share ,Market-to-book ratio = Market Value per share/ Book Value per Share ,Du Pont identity= (Net Income/ Sales) * (Sales Assets) * (Assets/ Total Equity), Dividends Payout= Cash Dividends/ Net Income ,Proportion of net income retained aka (the retention, or plowback, ratio) = Addition to Retained Earned/ Net Income, Internal Growth= (ROA * b)/ (1 – ROA * b), Sustainable growth rate= (SGR= (ROE * b)/ (1 – ROE * b) , Determinants of Growth= ROE= Profit margin * Total asset turnover * Equity multiplier, Single Cash Flow= PV= FV/ (1 + r), Present Values for Multiple Periods= Fv/ (1 + r), Present versus Future Value= FV = PV * FVIF (r, t),
Present Value for Annuity Cash Flows= PV= C * PVIFA ( r, t)
Future Value for Annuities= FVIFA ( r, t) = ((1 + r) – 1) /r = ( FVIF(r,t) – 1) /r
A Note on Annuities Due =