Corporate Finance CFA Level Flashcards

Terms Definitions
What are bank sources?
What is capital budgeting?
What is payback period?
Unlever Beta Formula
B(u,c)=B(l,c)/(1+((1-tax rate)*(debt(c)/equity(c))))
What are Lines of credit?
What is net present value?
Describe Shareholder rights in corporate governance
What is the purpose of WACC?
Describe members of the compensation committee
What categories of capital budgeting projects include?
What is the equation of bond equivalent yield in Quantitative Methods?
After Pro forma income statement and balance sheet are constructed, what is the next step?
What is the equation of weighted average cost of capital?
What methods could be used to calculate cost of equity capital?
Cost of Preferred Equity
Annual Preferred Dividend/Preferred Share Price
It pro forma required assets are greater that liabilities plus equity, what is the result called?
Financial deficit
If a firm is combined with segments, how an analyst forecast sales of that firm?
What is the purpose of managing a firm's daily cash position?
What is a simple, but not necessarily realistic assumption in reconciling the income statement & balance sheet?
What is the equation of country risk premium?
What is the equation of money market yield?
What is the equation of % discount from face value?
Which structures should be used by an analyst calculating a firm's WACC?
What is the way mentioned in Schweser to construct a pro forma financial statements for the next period?
Project Sequencing
Different Projects may be scheduled to start at various points in time
What are the impacts on B/S by changes in dividend while reconciliation I/S & B/S?
Country Risk Premium Developing Market
Sovereign Yield Spread Developing Market * (Annualized Standard Deviation Developing Market Stock Index/Annualized Standard Deviation Developing Market Govern. Bond Index)
Cost of Capital (Beta consideration)
1.) Select Comparables
2.) Estimate The Comparables Beta
3.) Unlever the Comparables Beta
4.) Level the Unlevered Beta for a Projects' Financial Risk
Business Risk of Firm
the risk inherent in the firm's operations with regard to furturn return on assets.

Includes quantity of sales and operating risk
Primary Factors that influence Target Capital Structure Decision of Firm
1.) Business Risk
2.) Tax Position
3.) Financial Flexibility
4.) Attitude Toward Debt
Tax Position of Firm
Tax Position of Firm relates to the effective tax rate of the firm.
What are the sources of Short-term funding?
Bank Sources, Lines of credit, Non-bank sources
Weighted Average Cost of Capital (WACC)
(Aftertax cost of debt capital for Frim * Market Value Debt Ratio) + (Cost of Equity * Market VAlue Equity Ratio)
Sovereign Yield Spread Developing Market
YTM Developing Market Gov Bonds - YTM U.S. Treasury Bonds
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