Flashcard: Fundamentals of Corporate Finance and Valuation — 20 carte

Corporate finance — definition?

Managing resources to maximize shareholder value.

Role of corporate finance?

Secure funds and optimize resource use.

Balance sheet — structure?

Assets = claims; assets classified into current and fixed.

Assets — types?

Current and fixed assets.

Liabilities — division?

Current liabilities and long-term debt.

Equity — components?

Shareholders’ residual interest, including retained earnings.

Financial ratios — purpose?

Assess performance, valuation, and efficiency.

ROCE — meaning?

Efficiency in generating profits from capital employed.

PER — what?

Price-to-earnings ratio, valuation indicator.

EPS — calculation?

Net income divided by shares outstanding.

Investment analysis — focus?

Evaluating long-term projects via cash flows.

Capital budgeting — process?

Selecting projects to maximize value.

NPV — rule?

Accept if positive; adds value.

Cost of capital — includes?

Debt and equity costs, weighted as WACC.

WACC — formula?

Weighted average of debt and equity costs.

Time value of money — principle?

Money today is worth more than in future.

PV — what?

Present value of future cash flows.

FV — what?

Future value of current cash invested.

Discounting — mechanism?

Converts future cash to present value.

Capital structure — decisions?

Balance between debt and equity financing.