Module 1 Risk and Return
Question we should be able to answer after thismodule
1. My portfolio is risky so what?
2. How do we calculate returns of securities?
3. The standard deviation of the markets returns is about 20% - what does this mean?
Module 2 Security Transactions
1. What is the difference between a full-service and a discount broker?
2. What is ta margin account and what risks come with using one?
3. What are the differences between long and short positions?
Discount brokers: execute
Module 6 Mutual Funds and ETS
What are the benefits of mutual funds andETFs?
What types of mutual funds and ETFs are available
What are the costs mutual dfunds and ETFs?
Open-end investment company that invests its shareholders money in a div
Module 05 Stock Valuation Relative Valuation and More
Relative valuation focuses on how the market is currently valuing comparable financial assets
Market value ratios relate the firms market price to key accounting factors
PE Ratio: how much investors ar
Module 5 Stock valuation Discounted Cash Flow (DFC)
DCF Applying TVM concepts and finding the PV of futures cash flows adding those up and that will give
us an estimate of the value of the stock
Models: Dividend valuation model and Free cash flow
Module 4 stock issues, repurchase, expectations, and more
What are advantages and disadvantages of stock?
What do stock splits do?
What is the impact of a stock repurchase?
Why do we care about dividends?
Impact of expectations
Module 3 Indexes Order types
Market indexes and averages allow us to measure and compare performance
Dow jones average
o Just 30 large, stable firms
o Longest used
S&P 500 index
o Benchmark for most large-cap funds
o 500 firms
o 80% market cap overall mar
Module 3 Primary and secondary markets
1. What is the difference between primary and secondary markets?
2. Where and how do new securities issued?
3. What are NASDAQ and the New York Stock Exchange?
Two Kinds of Capital Markets
1. Primary markets: where n
Module 4 stock categories and more
1. What do we mean by value and growth stocks?
2. What is some of the information that analysts forecast and how can we use it?
High quality with long, stable records o
Module 1 Arithmetic vs Geometric Mean
When do we use the arithmetic average return?
How do we calculate the geometric average and what do we use it for?
What is the holding period return?
How do these return figures compare to each other
1. Stocks A and B have the following data. Assuming the stock market is efficient and the stocks
are in equilibrium, which of the following statements is CORRECT?
a. These two stocks must have the same dividend yield.
b. These two stocks should have the s
Analysis of Financial Statements
A. The burden of these debts and the companies ability to repay them can best be evaluated by comparing
each firms total debt to its total capital and comparing interest expense to the income
Overview of Financial Management
Striking the Right Balance
Invisible Hand guides companies as they strive for profits, and that hand leads them to decisions that benefit
o Described by Adam Smith in 1776
o Profit maximization is the
Financial Statements, Cash Flows, and Taxes
Financial Statements and Reports
a. Annual report a report issued annually by a corporation to its stockholders. It contains basic financial
statements as well as managements analysis of the firms
Financial Markets and Institutions
The Capital Allocation Process
A. People & organizations w/ surplus funds r saving today in order 2 accumulate funds 4 some future use.
i. Those with surplus funds expect to earn a return on their investme
Risk and Rates of Return
Travel is educational; it teaches
you how to get rid of money in a
- S. Barry Lipkin
The rate of return on an investment can be
calculated as follows:
Expected ending value
Let us all be happy and live within
our means, even if we have to
borrow the money to do it with.
Charles Farrar Browne
What four factors affect the level of
AT A GIVEN POINT:
Stocks and Their
I never wanted to be a millionaire.
I just wanted to live like one.
- Walter Hagan
Facts about Common
Ownership implies control
Stockholders elect directors
Directors select management
Introduction to Financial
Money is better than poverty. If
only for financial reasons.
First 2 Forms of Business
One final form
Time Value of Money
If you marry for money, you surely
will earn it.
Theory behind TVM
held today is more valuable than money
i.e., wed prefer $1 today to $1 tomorrow
to level the playing field, an inter
Exam 1 Formula Sheet
Stockholders equity = Paid-in capital + Retained earnings
Total equity = Total assets Total liabilities
Net operating working capital = Current assets (Accounts payable + Accruals)
Net operating working capital = Current ass
Bonds and Their
Can anyone remember when the
times were not hard or the
money was not scarce?
Ralph Waldo Emerson
What is a bond?
long-term debt instrument in which a
borrower agrees to make payments of
principal and interest, on
Analysis of Financial
Balanced budget requirements seem
more likely to produce accounting
ingenuity than genuinely balanced
Balance Sheet: Assets
Cash Flow, and Taxes
The university president always asks: Why is it
that you physicists always require so much
expensive equipment? The Department of
Mathematics requires nothing but money for
paper, pencils, and erasers.a
Chapter 16: 1. What is "harvesting" in the context of entrepreneurial finance? A) A seasoned equity offering B) A liquidity event brought about by the investor buying more shares in the venture C) Another name for the underwriting process D) The final sta
Chapter 15: 1. Why are there so many alternatives for new venture financing?
Answer: Part of the answer is that the providers have different objectives, capabilities, and constraints. Some, like banks, seek low-involvement, low-risk investments. Others, l
Chapter 14: 1. What are venture capital firms? And what characteristics do they seek in their investments?
Answer: A venture capital firm is a specific type of financial intermediary that has a unique organizational structure and a specific market niche.
Chapter 13: 1. Why does staging reduce the outside ownership share of ventures that ultimately are successful?
Answer: Staging of outside investment reduces the ownership interest of the investor. For a singlestage investment, once made, the investor's co
Chapter 12: 1. What is the "underinvestment problem," and when might a new venture face underinvestment?
Answer: Underinvestment occurs when a company has as attractive investment opportunity but lacks sufficient capital to pursue it, and when outside inv
Chapter 11: 1. If a venture has a constant return to scale, and there is no outside investment, how do you determine the portion of the entrepreneur total investment that maximizes her NPV of the venture?
Answer: With no outside investors, the larger the