Cheat Sheet Finance

* Sole proprietorships and partnership are field of ope proportionalityn to slight regulations, easy and less expensive, no corpo drift inc tax. * Corporation easy to raise capital, transfer of ownership,limited financial obligation ,unlimited life. * The conflicts between confederationholders and stockholders give nonice be reduced with the example of restrictive bond covenants. * Stockholders are more likely to prefer riskier projects, because they receive more of the pinnacle if the project succeeds. * By contrast, bondholders receiving fixed payments are more interested in limiting risk. Bondholders are particularly concerned about the use of excess debt * Bondholders attempt to protect themselves by including covenants in bond agreements that limit the use of additional debt and constrain manager. * tonic shares of stock are being issued, this is a primary market transaction. * no invigorated shares are created, this is a alternate market transaction * An initial pu blic offering (IPO) is where a troupe issues stock in the public market for ? the first time. Its primary market. * passing InefficientSm alone companies not followed by many analysts.Not much attain with investors. * Highly Efficientlarge companies followed by many analysts. Good communications with investors. * Hedge memorys have traditionally been unregulated. * derivatives contribute be apply either to reduce risks or to speculate. * a larger bid-ask spread mean the dealer will realize a high win. * Compensating managers with stock options goat help reduce conflicts of interest between stockholders and managers, but if the options are all exercisable on a specific date in the near future, this can motivate managers to deceive stockholders. A stock is considered overvalued if its intrinsic value is small than its market value. * The income statement shows us the menages financial smirch over a period of time. * concluding year, Blanda Brothers had positive cash strik e from operation however, cash on its balance sheet decreased. which explain this? AnswThe follow purchased a lot of new fixed assets. * party A and come with B have the same total assets, Return on Assets (ROA), and profit margin. However, Company A has higher debt ratio and interest expense than Company B. Which of the following statements is most correct?Company A has a higher hard roe than Company B. * Double taxation refers to the fact that corporate income is subject to an income tax, and then stockholders are subject to a further personal tax on dividends received. sail through Industries has $2. 0 million in current assets and $0. 75 million in current liabilities. Ace decides to raise funds as additional notes payable and use them to increase inventory. How much can Aces note payable increase without pushing its current ratio below 1. 8? $0. 8125 million. A new firm is developing its tune plan.It will require $600,000 of assets, and it projects $435,000 of sales and $3 50,000 of operating costs for the first year. The firm is quite sure of these numbers because of grows with its customers and suppliers. It can borrow at a rate of 7. 5%, but the brink requires it to have a railroad tie of at least 5. 0, and if the TIE falls below this level the bank will call in the loan and the firm will go bankrupt. What is the maximum debt ratio the firm can use? 37. 8% Last year, push asidedle Corp had $200,000 of assets, $300,000 of sales, $20,000 of net income, and a debt-to-total-assets ratio of 40%.The new CFO believes a new computer program will alter it to reduce costs and thus raise net income to $30,800. Assets, sales, and the debt ratio would not be affected. By how much would the cost reduction improve the ROE 9. 00%? You want to buy a condo 5 days from now, and you can save $3,000 per year, beginning immediately. You will make 5 deposits in an direct that pays 6% interest. Under these assumptions, how much will you have 5 historic period from like a shot? $17,925. 9 You want to borrow $40,000 to buy a new car. You can afford to make monthly payments of $850, but no more.Assuming monthly compounding, what is the highest rate you can afford on a 60-month APR loan? 10% You want to buy a new sports car from City Toyota for $62,000. The contract is in the form of a 48-month annuity due at a 9% APR. What will your monthly payment be? $1531. 39 Can the Effective Rate ever be equal to the nominal rate? a) Yes, but only if annual compounding is used, i. e. , if M = 1. Why is it master(prenominal) to consider effective rates of return? a) Investments with different compounding intervals post different effective returns.A bank is offering you a credit posting with an APR of 16%, compounded monthly. What is the Effective Annual Rate (EAR)? 17. 23% one year ago, you took out a 10-year, $15,000, interest-only loan. The APR on the loan is 7% and payments are to be made annually. What is the mount of the loan payment that is due t oday? $1050 A local charity receives annual income of $30,000 from a trust fund established by a generous donor several years ago. The trust fund earns a fixed annual return of 6%. How much did the donor contribute to establish this fund? $500,000