Question

1. Match the following

____ Individual retirement arrangements in which contributions are not tax deductible and income but the future income and capital gains within these accounts are not taxed if the money is withdrawn after age 59 1/2.

____ Ordinary corporate operating losses can be carried forward indefinitely to offset taxable income in a given year.

____ Indicates the extent to which current liabilities are covered by those assets expected to be converted to cash in the near future.

____ Measures the firm’s ability to pay-off short-term obligations without relying on the sale of inventories.

____ Indicates how many times inventory turned over during the year.

____ Indicates the average length of time the firm must wait after making a sale before it receives cash.

____ Measures how effectively the firm uses its plant and equipment.

____ Measure of the firm’s ability to meet its annual interest payments.

____ Measures EBIT per dollar of sales.

____ Measures net income per dollar of sales.

____ Measures the rate of return on the firm’s assets.

____ Measures the rate of return on common stockholder’s investment.

____ Shows the dollar amount investors will pay for $1 of current earnings.

____ Process of comparing a particular company with a subset of top competitors in its industry.

____ Used to estimate the likelihood of improvement or deterioration in a firm’s financial condition.

____ Contains basic financial statements as well as management’s analysis of the firm’s past operations and future prospects.

____ Statement of the firm’s financial position at a specific point in time.

____ Represents the amount that stockholders paid the company when shares were purchased and the amount of earnings the company has retained since its origination.

____ Represent the cumulative total of all earnings kept by the company during its life.

____ Current assets.

____ Current assets minus current liabilities.

____ Operating current assets minus operating current liabilities.

____ Summarizes a firm’s revenues, expenses, and profits during a reporting period.

____ Earnings from operations before interest and taxes.

____ Charge to reflect cost of assets depleted in production process.

____ Represents a decline in value of intangible assets.

____ Shows how items that affect the balance sheet and income statement affect the firm’s cash flows.

____ Shows by how much a firm’s equity changed during the year and why this change occurred.

____ Amount of cash that could be withdrawn without harming a firm’s ability to operate and produce future cash flows.

____ Amount to which a cash flow will grow over a given period of time when compounded at a given rate. 101.____ Value today of future cash flow.
____ Arithmetic process of determining final value of a cash flow when compound interest is applied. 103. ____ Rate of return you could earn on an alternative investment of similar risk.

____ Process of finding the present value of a cash flow.
____ In a financial market, the chance that an investment will provide a low or negative return. 106. ____ Amount by which prices increase over time.

____ Rate of interest that would exist on default-free U.S. Treasury securities if no inflation were expected.

____ Risk of capital losses to which investors are exposed because of changing interest rates.

____ Risk that a decline in interest rates will lead to lower income when bonds mature and funds are reinvested.

____ Relationship between bond yields and maturities.

____ Graph showing the relationship bond yields and maturities.

___ Long term debt instrument.

____ Specified number of dollars of interest paid each year.

____ Provision in a bond contract that gives the issuer the right to redeem the bonds under specified terms prior to the normal maturity date.

____ Bonds that are exchangeable at the option of the holder for the issuing of the firm’s common stock. 116.____ Rate of return earned on a bond if it is held to maturity.
____ High-risk, high-yield bonds.
____ Risk an investor would face if he or she held only one asset.

____ Statistical measure of the variability of a set of observations.

____ Tendency of two variables to move together.

____ Document giving one person the authority to act for another, typically the power to vote shares of common stock.

____ Action whereby a person or group succeeds in ousting a firm’s management and taking control of the company.

____ Provision in the corporate charter or bylaws that gives common stockholders the right to purchase on a pro rata basis new issues of common stock (or convertible securities).

____ Similar to a bond in some aspects and to common stock in others.

{Answer key}

Amortization

Annual Report

Balance Sheet

Benchmarking

Bond

Call Provision

Capital Gain

Capital Loss

Carryforward

Compounding

Convertible Bonds

Correlation

Coupon Payment

Current Ratio

Days Sales Outstanding Ratio

Depreciation

Discounting

Fixed Assets Turnover Ratio

Free Cash Flow

Future Value

Income Statement

Inflation

Interest Rate Risk

Inventory Turnover Ratio

Junk Bonds

Marginal Tax Rate

Net Operating Working Capital

Amortization

Annual Report

Balance Sheet

Benchmarking

Bond

Call Provision

Capital Gain

Capital Loss

Carryforward

Compounding

Convertible Bonds

Correlation

Coupon Payment

Current Ratio

Days Sales Outstanding Ratio

Depreciation

Discounting

Fixed Assets Turnover Ratio

Free Cash Flow

Future Value

Income Statement

Inflation

Interest Rate Risk

Inventory Turnover Ratio

Junk Bonds

Marginal Tax Rate

Net Operating Working Capital

Net Working Capital

Operating Income
Operating Margin
Opportunity Cost
Preemptive Right
Preferred Stock
Present Value
Price/Earnings Ratio
Profit Margin
Progressive
Proxy
Quick Ratio
Real Risk-Free Rate of Interest OO. Reinvestment Rate Risk
Retained Earnings
Return on Common Equity
Return on Total Assets
Risk
Roth IRAs
Stand-Alone Risk
Standard Deviation
Statement of Cash Flows

Statement of Stockholders’ Equity

Stockholders’ Equity

Takeover

Term Structure of Interest Rates

Times-Interest-Earned Ratio CCC. Traditional IRAs
Trend Analysis
Working Capital
Yield Curve
Yield to Maturity

Answer 1

Free Cash Flow Amount of cash that could be withdrawn without harming a firm’s ability to operate and produce future cash flows.

Future Value Amount to which a cash flow will grow over a given period of time when compounded at a given rate.

Present Value Value today of future cash flow.

Compounding Arithmetic process of determining final value of a cash flow when compound interest is applied.

Opportunity Cost Rate of return you could earn on an alternative investment of similar risk.

Discounting Process of finding the present value of a cash flow.

Risk In a financial market, the chance that an investment will provide a low or negative return.

Inflation Amount by which prices increase over time.

Real Risk-Free Rate of Interest Rate of interest that would exist on default-free U.S. Treasury securities if no inflation were expected.

Interest Rate Risk Risk of capital losses to which investors are exposed because of changing interest rates.

Reinvestment Rate Risk Risk that a decline in interest rates will lead to lower income when bonds mature and funds are reinvested.

Term Structure of Interest Rates Relationship between bond yields and maturities.

Yield Curve Graph showing the relationship bond yields and maturities.

Bond Long term debt instrument.

Coupon Payment Specified number of dollars of interest paid each year.

Call Provision Provision in a bond contract that gives the issuer the right to redeem the bonds under specified terms prior to the normal maturity date.

Convertible Bonds Bonds that are exchangeable at the option of the holder for the issuing of the firm’s common stock.

Yield to Maturity Rate of return earned on a bond if it is held to maturity.

Junk Bonds High-risk, high-yield bonds.

Stand-Alone Risk Risk an investor would face if he or she held only one asset.

Standard Deviation Statistical measure of the variability of a set of observations.

Correlation Tendency of two variables to move together.

Proxy Document giving one person the authority to act for another, typically the power to vote shares of common stock.

Takeover Action whereby a person or group succeeds in ousting a firm’s management and taking control of the company.

Preemptive Right Provision in the corporate charter or bylaws that gives common stockholders the right to purchase on a pro rata basis new issues of common stock (or convertible securities).

Preferred Stock Similar to a bond in some aspects and to common stock in others.