Business finance vocabulary

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  1. Cash flow
    concerns revenues and expenditures that are cash only.Do not consider the credit- issued or taken, also disregard depreciation
  2. Productive assets
    Fixed assets- long term assets, usually used for more than one year
  3. Residual cash flow
    Net profits, Retained earnings
  4. working budget management decisions 
    How should the firm finance or pay for their assets? some options- retained earnings, issue or sell common stock, borrow from commercial bank
  5. Capital budget decisions 
    What productive assets should the firm buy or invest in?
  6. working capital management decisions 
    How should day to day financial matters be managed?
  7. agency relationships 
    Relationships between business owners (principals) and decision-making specialists (agents) hired to perform a service; to manage a principal's operations and maximize return on investment
  8. agency costs
    the costs of the conflict of interest between stockholders and management
  9. ROA
    Return On Assets
  10. ROE
    Return On Equity 
  11. Financial statement analysis 
    Application of analytical tools to general-purpose financial statements and related data for making business decisions.
  12. benchmarks
    performance measures that are used by similar types of businesses to monitor key operations
  13. Liquidity ratio
    1 of 5 categories of Financial Analysisfinancial ratios that measures the organization's ability to meet its current debt obligations with its current assets.
  14. Asset management ratio
    1 of 5 categories of Financial Analysisprovide insight into how EFFECTIVELY firms measure assets to generate revenue
  15. financial debt management ratio
    1 of 5 categories of Financial Analysis(Total Debt) / (Total Assets)
  16. Profitability ration
    1 of 5 categories of Financial Analysis,a financial ratio that describes the firm's profits in terms of a source of profits (for example, sales or total assets).
  17. Market value ratio
    1 of 5 categories of Financial Analysis- Price-Earning Ratio- Price-Sales Ratio- Market-to-Book Ratio
  18. Current ratio
    Subset of Liquidity RatioCurrent Assets/Current Liabilities
  19. quick ratio
    Subset of Liquidity Ratios-Current Assets - Inventory / Current LiabilitiesAlso called "Acid Test"
  20. inventory turnover ratio
    Subset of Efficiency Ratios-A ratio that measures the liquidity of inventory by measuring the number of times average inventory sold during the period; computed by dividing cost of goods sold by the average inventory during the period.
  21. days sales in inventory ratio
    Subset of Efficiency Ratios-365 / Inventory Turnover Ratio
  22. accounts receivable turnover ratio
    Subset of Efficiency Ratios-Net Credit Sales / Average Accounts Receivable, the number of times the average amount of accounts receivable is collected during a specified period
  23. total assets turnover ratio
    Subset of Efficiency Ratios-Sales/Total AssetsHigher turnover= more efficiency
  24. fixed assets turnover ratio
    Subset of Efficiency Ratios-Sales/Net Fixed Assetsmeasures a company's ability to generate net sales from fixed asset investments (specifically property, plant and equipment),
  25. inflation 
    The phenomenon of prices increasing with the passage of time.
  26. public financial markets
    Markets in which national, state, and local governments raise money for highways, education, welfare, and other public activities.
  27. institutional investors 
    Large investors such as pension funds or mutual funds.
  28. Income statement 
    A financial statement that measures the profitability of the firm over a time period. All expenses are subtracted from sales to arrive at net income.
  29. restructuring 
    Process that can take many forms in a corporation, such as changes in the capital structure (liability and equity on the balance sheet). It can also result in the selling of low-profit-margin divisions with proceeds reinvested in better investments
  30. free cash flow
    Cash flow from operating activities, minus expenditures required to maintain the productive capacity of the firm, minus dividend payouts.
  31. Primary markets
    The market for the raising of new funds as opposed to the trading of securities already in existence.
  32. price-earnings ratio
    The multiplier applied to earnings per share to determine current value. [This] ratio is influenced by the earnings and sales growth of the firm, the risk or volatility of its performance, the debt-equity structure, and other factors.
  33. balance sheet
    A financial statement that indicates what assets the firm owns and how those assets are financed in the form of liabilities or ownership interest.
  34. secondary market
    The market for securities that have already been issued. It is a market in which investors trade back and forth with each other.
  35. insider trading 
    This occurs when someone has information that is not available to the public and then uses this information to profit from trading in a company's common stock.
  36. liquidity 
    The relative convertability of short-term assets to cash. Thus, marketable securities are highly liquid assets, while inventory may not be.
  37. depreciation 
    The allocation of the initial cost of an asset over its useful life. The annual expense of plant and equipment is matched against the revenues that are being produced.
  38. earnings per share
    The earnings available to common stockholders divided by the number of common stock shares oustanding.
  39. net worth or book value 
    If you take all the assets of the firm and subtract its liabilities and preferred stock, you arrive at [this].
Card Set
Business finance vocabulary
basic vocabulary
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