Term
How do you calculate Return on Equity?*
ROE is considered as...
Use it by looking at... |
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Definition
Net Income
Average Owner's Equity
"the ultimate measure of performance from the shareholders' POV."
The industry and our history trend...when trend is going UP, this is good! |
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Term
| What two forces effect ROE? |
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Definition
- Operations
- Financing with debt (non-operating)
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Term
How do you calculate RNOA?
(Return on Net Operating Assets) |
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Definition
NOPAT (Net Operating Profit After Tax)
Average NOA (Net Operating Assets) |
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Term
| How do you calculate NOA? (Net Operating Assets) |
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Definition
Current/LT Operating Assets
- Current/LT Operating Liabilities |
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Term
| What items are considered Operating income for the balance sheet? |
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Definition
Sales
COGS
Gen/Admin Expense
R&D
Income Taxes |
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Term
| What items are considered Nonoperating income for the balance sheet? |
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Definition
Dividens
Interest Revenue/Expense
Hedging Gains/Losses |
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Term
| How do you calculate NOPAT? |
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Definition
Operating Income * (1 - Tax Expense/Pretax Income)
^^ Effective Tax Rate |
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Term
| How do you calculate the Effective Tax Rate?* |
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Definition
Tax Expense
Pretax Income |
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Term
| How do you calculate Spread? |
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Definition
Return on financing
- Cost of financing |
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Term
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Definition
The extent that you are using debt vs. equity to finance your company.
*More debt = more leverage = more risk* |
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Term
| Class #8 Notse (Slide 30) |
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Definition
(Insert image of slide equation)
ROE = RNOA + (Financial leverage * Spread) |
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Term
| Explain the Operating Cycle: |
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Definition
Receive Goods--------------------------Cash from Customer
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A/R Inventory A/P
Holding + Holding - Turnover
Period Period |
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Term
| What is the Current Ratio? |
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Definition
Current Assets
Current Liabilities |
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Term
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Definition
(Cash - Marketable Securities + A/R)
Current Liabilities |
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Term
Treasury stock is a contra-account.
When purchasing treasury stock... |
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Definition
both assets (cash) and stockholder's equity decrease.
(See Class #8 slides 57-58 for repurchase and resale of treasury stock) |
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Term
Issued Shares
- Treasury Stock
{__________} |
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Definition
| Total Outstanding Shares held outside of company |
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Term
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Definition
EQUITY.
It always has priority on Dividend payout.
Typically, it does not vote. |
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Term
| What are Stock Dividends? |
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Definition
When a company looking to raise cash issues additional shares of stock in exchange for cash, instead of issuing dividends.
(See Class #8 slide 74) |
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Term
| Small stock vs. Large stock dividends: |
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Definition
Small Stock: when it is less than 25%, we use Market Value, 150,000 * par value goes into common stock, the rest goes into "additional paid in capital"
Large Stock: when it is greater than 25%, we use Par Value, it goes straight into common stock, and decreases retained earnings by the same.
Large stock Dividends have no impact to Additional paid-in-capital
(See Class #8 Slides 75-76) |
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Term
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Definition
| See class #8 slides 77-79 (need better explanation here) |
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Term
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Definition
| When a parent company distributes common shares of a subsidiary division, (See class #8 slides 80) |
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Term
| Know how to do a roll forward of contributed capital: |
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Definition
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Term
What is asset turnover?
Why is it important? |
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Definition
Net Income
Average Total Assets
Asset Turnover measures productivity and is good when it is higher because it increases shareholder value. |
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Term
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Definition
| ROE = RNOA + Return from Nonoperating Activities |
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