coverage ratios
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measure the ability to make payments
measure of default risk
5 basic features to equity
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, 1. ownership
2. voting rights
3. dividends (cash of additional shares)
4. residual claim (last in line--if the company goes bankrupt, you're losing
your money)
5. preemptive right (right to purchase additional shares of company stock
as a shareholder)
debentures (reputation bond)
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not secured by specific assets
4 characteristics in indenture
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1. name of business/firm who issed bond
2. maturity date
3. coupon rate
4. face value
5. call option (right to retire bond, pay any interest due plus the face value)
2 types of leverage ratios
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1. total debt ratio
2. debt/equity ratio
, higher the ratio, higher the risk
common stock is a
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variable income security
what does the investments branch of finance do?
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invest capital to earn a return (%)
T/F: Rd is not the same thing as the coupon rate
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true; it is based on current conditions
company gets riskier, rd goes up
company gets safer, rd goes down
interest on amortization
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, beg balance (PV of period) x r'
sole proprietoship
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an unincorporated business owned by one individual
AAA-BBB
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investment grade, low risk, low YTM
enterprise value
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common stock, preferred stock, and debt that pays interest
= market value of common stock + market value of preferred stock + market
value of debt - cash
lets you compare companies
how do investors buy a firm in private firm in private equity?
Give this one a try later!
Give this one a try later!
measure the ability to make payments
measure of default risk
5 basic features to equity
Give this one a try later!
, 1. ownership
2. voting rights
3. dividends (cash of additional shares)
4. residual claim (last in line--if the company goes bankrupt, you're losing
your money)
5. preemptive right (right to purchase additional shares of company stock
as a shareholder)
debentures (reputation bond)
Give this one a try later!
not secured by specific assets
4 characteristics in indenture
Give this one a try later!
1. name of business/firm who issed bond
2. maturity date
3. coupon rate
4. face value
5. call option (right to retire bond, pay any interest due plus the face value)
2 types of leverage ratios
Give this one a try later!
1. total debt ratio
2. debt/equity ratio
, higher the ratio, higher the risk
common stock is a
Give this one a try later!
variable income security
what does the investments branch of finance do?
Give this one a try later!
invest capital to earn a return (%)
T/F: Rd is not the same thing as the coupon rate
Give this one a try later!
true; it is based on current conditions
company gets riskier, rd goes up
company gets safer, rd goes down
interest on amortization
Give this one a try later!
, beg balance (PV of period) x r'
sole proprietoship
Give this one a try later!
an unincorporated business owned by one individual
AAA-BBB
Give this one a try later!
investment grade, low risk, low YTM
enterprise value
Give this one a try later!
common stock, preferred stock, and debt that pays interest
= market value of common stock + market value of preferred stock + market
value of debt - cash
lets you compare companies
how do investors buy a firm in private firm in private equity?
Give this one a try later!
