Final Exam Study Guide Terms Bus 330 PDF

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Study Guide terms for the Final Exam. Professor Stoyan Stoyanov....

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BUS 330 Final Exam Study Guide --PV = Present Value (e.g. $100) – FVN = The Future Value N periods ahead. – CFt = The Cash Flow at period t. It can be positive or negative. – I or i = the interest rate earned (e.g. 5%) – INT = dollars of interest earned (e.g. $5) – N = the number of periods (e.g. N = 3) --Real Rate = (1 + I)/(1 + Infl) – 1.

Future Values: In Excel, we find using the function FV(I,N,0,-PMT). -Future Value of an Ordinary Annuity (payments at end of period) In Excel, the formula is: FV(I,N,PMT,0). Present Values: The formula in Excel is PV(I,N,0,FV). -Present Value of an Ordinary Annuity In Excel, the formula is: PV(I,N,-PMT,0). Interest Rate: The Formula in Excel is RATE(N,0,-PV,FV) Sometimes we need to know how long it would take to accumulate a sum of money. - In Excel the formula is: NPER(I,0,-PV,FV). Finding annuity payments in Excel: PMT(I,N,-PV,[FV]) Finding the number of periods in Excel: NPER(I,PMT,-PV,[FV]) Finding the interest rate in Excel: RATE(N,PMT,-PV,[FV]) The PV of a perpetuity equals: PV= PMT Divided by I Annuity Due Excel it is a case of annuity due (the default is ordinary annuity), PV(I,N,PMT,FV,Type). Uneven Cash Flow (stocks) - Present Value In Excel, we use the function NPV(I,CF1 ,CF2 ,…,CFN ) - Future Value (fuck yourself) - Interest Rate (uneven IRR) To solve for I, run IRR(-PV,CF1 ,…,CFN ) - if there is a cash flow at time 0, then you need to run IRR(-(PV-CF0 ),CF1 ,…,CFN ) For example: suppose you could borrow either using a credit card that charges 1% per month or a bank loan with a 12% quoted nominal rate compounded quarterly. Which should you choose? Credit card EFF: (1 + 0.01)12 – 1 = 12.6825% Bank loan EFF: (1 + 0.12/4)4 – 1 = 12.5509% Balance sheet -Assets (items a company owns, no long term assets, yearly) -Liabilities (claims other groups have against company’s value) NOWCO Net Operating Working Capital = Operating Current Assets – Operating Current Liabilities = Cash + Accounts Receivable + Inventories – (Accounts Payable + Accruals) TNOC Total Net Operating Capital = Net Operating Working Capital + Operating Long-term Assets. NOPAT Net Operating Profit After Taxes - defined as the amount of profit the company would generate if it had no debt: NOPAT = EBIT (1-tax rate). e.g. In 2007, NOPAT = $283.8(1 – 0.4) = $170.3 FCF Free Cash Flow - the cash flow available for distribution after the company has made all investments in fixed assets and working capital necessary to sustain ongoing operations = NOPAT – Net Investment in Operating Capital e.g. In 2007, FCF = $170.3 – ($1800 – $1,455) = -$174.7 The current ratio: Ability to meet short-term obligations =Current Assets/Current Liabilities ROA Return on Assets = PMS x TAT PMS Profit Margin on Sales =ROA/TAT TAT Total Asset Turnover...