Ratios allow for better comparison through
time or between companies
As we look at each ratio, ask yourself what the
ratio is trying to measure and why is that
5 Categories of Ratios (see page 63)
Purpose of finance?
Determining the value of assets.
Stocks, Bonds, Loans, etc.
What information do we need in order to
Corporate finance is concerned with determining the value of a
Features of Common Stock
Common stockholders own the corporation and have
ultimate control over it
They have a residual (leftover) claim to all corporate
income that is not paid out to others
Common stockholders have the right to vote on all
What is Capital Budgeting?
represents a long-term investment decision
usually requires a large initial cash outflow with
the expectation of future cash inflows
Good Decision Criteria
We need to ask ourselves the following
FINC 3210: Principles of Finance
Relevant Cash Flows
The cash flows that should be included in a
capital budgeting analysis are those that will
only occur if the project is accepted
These cash flows are called incremental cash
The stand-alone pri
Accounting statements are the traditional starting
point for financial analysis.
H d the perspectives of accounting and finance
How do h
The balance sheet is a snapshot of the firms assets and