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Hamdi D (1)

Finance Final Exam Notes.docx

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York University
FINE 2000
Hamdi D

Finance The financial manager has to determine what capital investment projects to invest in capital budgeting decision and how to pay for those assets financing decisionChoosing between two broad categories of external financing debt or equity are capital structure decisions Treasurer looks after cash raising new capital and relationships with stakeholders controller prepares financial statements manage internal accounting and looks after tax affairs Another term for cash flow from assets is free cash flow because it is the cash available to pay out bond and share holders CF From AssetsCF used in financingChange in cash in the bank CF From AssetsCash flow to creditorscash flow to stockholdersincrease in cashCF from assetsOperating Cash Flownet capital spendingadditions to non cash NWC Operating Cash FlowNet IncomedepreciationinterestNet capital spendingend Net fixed assetsbeg net fixed assetsdepreciationAdditions to non cash NWCending non cash NWCBeg non cash NWC Cash Flow to creditorsinterest paidnet new borrowing Cash flow to equity holdersdividends paidnet new equity raised Non Cash NWCCurrent AssetsCashCurrent LiabilitiesCorporate taxfederal tax 2212provincial tax Provincial tax is 1312 for small business on the first 400000 taxable income Interest is tax deductible while dividends are not Marginal tax rate is tax paid on each additional dollar of income while average tax rate is the total tax bill divided by total income Leverage ratiosshow how heavily a company is in debt Liquidity ratiosshow how easily a firm can convert assets to ashEfficiency or turnover ratiosmeasure how productively a firm is using its assets Profitability ratiosmeasure the firms return on its investments For multiple cash flow FV and PV problems do the years separately and add them up Annuities cash flows of equal amount every period for a limited number of periods Perpetuities cash flows of equal amount every period for an unlimited number of periods A level stream of payments starting immediately is known as an annuity duePVPV x 1r ADA FVFV x 1r ADA
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