[COMMERCE 3FH3] - Midterm Exam Guide - Comprehensive Notes for the exam (14 pages long!)

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 3FH3
• Professor: Adeel Mahmood

Document Summary

Cash flows: an objective measure of the creation of economic value. Accounting measures provide an indication of economic value creation if we look at a firm"s financial statements. To accurately calculate and understand the economic value created we must use cash flows. For bondholder or debt investor: cash in vs. cash out, cash flow available and free after providing for all operating and investing claims on the assets of the business. For equity investor: cash in vs. cash out, cash flow available and free after providing for all non-equity claims on the assets of the business. Investment made to reduce risk of adverse price movements in a security by taking offsetting position in related security. A fund that can: take both long and short positions, use arbitrage, buy/sell undervalued securities, trade options or bonds. Invest in opportunities to get impressive gains at reduced risk.