2420618
Description
Flashcards by dylan_earl, updated more than 1 year ago
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Created by dylan_earl
over 9 years ago
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| Question | Answer |
| Common Stock | Ownership shares in a publicly held corporation |
| Primary Market | Place where sale of new stock first occurs |
| Initial Public Offering (IPO) | First offering of stock to general public |
| Define Seasoned Issue | Sale of new shares by a firm that has already been through an IPO |
| Define Secondary Market | Market in which already already issued securities are traded by investors |
| Define: Price Earnings Ratio | Price per share dividend by earnings per share |
| Define Dividend | Periodic cash distribution from the firm to the shareholders |
| Define Retained Earnings | Profits that are retained in the firm and reinvested in its operations |
| Define Book Value | Net worth of the Firm according to the balance sheet |
| Liquidation Value | Net proceeds that would be realized by selling the firm's assets are paying off its creditors |
| Market Value Balance Sheet | Financial statement that uses market value of assets and liabilities |
| Difference between firms actual market value and its liquidation/book value | Attributable to its "going concern value" |
| Define Expected Return | r = Div1 + P1 - P0 / P0 |
| Formula for Dividend Yield | Div1 / P0 |
| Formula for Capital Gains Yield | P1-P0 / P0 |
| Define the Dividend Discount Model | Share value equals PV of all expected future dividends |
| Zero Growth Case | P0 = Div1/r |
| Constant Growth Case | P0 = Div1 / r - g |
| Expected Rate of Return from the DDM formula | r = D1/P0 + g |
| What is the Plowback ratio | Fraction of earnings retained by the firm is called the Plowback Ratio |
| Define Payout Ratio | Fraction of earnings a company pays out in dividends |
| Formula for Growth Rate | g = ROE x Plowback ratio |
| How to Calculate: Present Value of Growth Opportunities | NPV of Firms Future Investments |
| Define: Sustainable Growth Rate | Steady rate at which firm can grow (Plowback x Return on Equity) |
| How do you calculate Price-Earning Ratio | Stock Price / EPS |
| What is Technical Analysis | Attempting to identify undervalued stocks by searching for patterns in past stock prices |
| Random Walk | Security Prices change randomly, with no predictable trends/patterns |
| Fundamental Analysis | Attempting to find misplaced securities by analyzing fundamental information |
| What is an efficient market | A market where prices reflect all available information |
| Weak Form Efficiency is a market where prices rapidly reflect all information contained in the history of past prices and volume T/F | True |
| Define Semi-Strong Form Efficiency | Market where prices rapidly reflect all publicly available information |
| Strong Form Efficiency is a market where prices reflect no information that could be used to determine true value of assets T/F | False. Reflect all information |
| What is a market anomalies | There are always some puzzles or apparent exceptions of efficient market theory |
| New Issues Puzzle | Researchers found that early gains from buying IPOs often turn to losses |
| Behavioural Finance: Investors are 100% rational all the time. | False Not always 100% |
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