Finance chapter 2

The real rate of returned is the return above inflation risk premium
lowest to highest return T-bills, LT courpret bonds, common stock, small firm common stock
the following describes the properties of term structure of interest -the LT interest rates are typiclly higher than short term rates which gives an upward sloping curve-the interest rates for different maturities tend to move together and shifts the entire yeild curve -there are 3 types of shifts
which of the following is anot a valid theory that attepts to explain the shape of the term structure of interest the fisher theory
what term structure theory best explains the normal yeild curve the best? liquidity preference theory
the increase in owners equity for a given period is equal to net income minus dividends
the following would increase in shareholders equity firm sold common stock at par value-the firm sold common stock above par value -the company had a positive net income greater than dividens paid
retaind earnings belongs in… the balance sheet
these are in the income statement -depreciated expenses -cogs-interest expense
these belong in the liability section of balance sheet -accurals -short term debt -lt debt
financial analysis use historical finanical statements and is thus useful only to asset past preformances
common sized balance sheets show each balance sheet account as a % of total assets
common sized income statements compare comanies w/ the same level of total sales
for a realiter ith inventory to sell the acid ratio test will be less than the current ratio, thus providing a more accurate measure of liquity
which of the following finanical ratios s the best measure f the opperating effectiveness of a firms mang. operating return on assets
the firm that wants to know if it has enough to pay the bills would use what ratio liquidity
what ratio would be most useful to asses the risk associated with a firm being able to pay off short term credit fixed asset turnover
best way to determine how customers are paying for their purcheases avg collection period

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