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CHAPTER 2
Financial institution an intermediary that
channels, the savings of individuals, businesses
and governments into loans or investments.
Commercial banks institutions that provide
savers with a secure place to invest their funds
and that offer loans to individual and business
borrowers.
Investment banks institutions that assists
companies in raising capital, advise firms on
major transactions such as mergers or financial
restructurings and engage in trading and market
making activities.
Shadow banking system a group of institutions
that engage in leading activities, much like
traditional banks but do not accept deposits and
therefore are not subject to the same
regulations as traditional banks.
Financial markets forums in which suppliers of
funds and demanders of funds can transact
business directly.
Private placement The sale of a new security
directly to an investors or group of investors.
Public offering The sale of either bonds or
stocks to the general public.
CHAPTER 3: FS ANALYSIS
Generally accepted accounting principles (GAAP)
the practice and procedure guidelines used to
prepare and maintain financial records and
reports, authorized by the financial accounting
standard board (FASB)
Financial accounting standard board (FASB) the
accounting professions rule-setting body, w/c
authorizes GAAP.
Public company accounting oversight board
(PCAOB) a not for profit corporation
established by the sarbanes- oxley act of 2002 to
protect the interest of investors.
Stockholders report annual report that
publicly owned corporations must provide to
stockholders. it summarizes and documents the
firms financial activities during the past year.
Letter to stockholders the first element of the
annual stockholders report and the primary
communication from management.
Income statement provides a financial
summary of the firms operating results during a
specified period.
Dividend per share (DPS) the amount of cash
distributed during the period on behalf of each
outstanding share of common stock.
Liquidity a firms liability to satisfy its shortterm obligations as they come due.
PAYABLE
ANNUAL
FOR
COMMON
CHAPTER 4 :
Depreciation a portion of the costs of fixed
assets charged against annual revenues over
time.
Modified accelerated cost recovery system
system used to determine the dep of assets for
tax purposes.
Recovery period the appropriate depreciable
life of a particular asset as determined by MACRS
= NOPAT + DEPRECIATION
or
= EBIT X (1 T) + DEPRECIATION
= EBIT X (1 T)
Free cash flow (FCF) the amount of cash flow
available to investors (creditors and owners)
after the firm has met all operating needs and
paid for investments in net fixed assets and net
current assets.
FCF = OCF NET FIXED ASSET INVESTMENT , NET CURRENT ASSET INVESTMENT