Important finance terms Part 2

Continuation of "Important finance terms Part 1":
Quiz by oowen32
Last updated: July 6, 2016
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First submittedJuly 5, 2016
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A summary of the financial balances of an individual or organisation. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year.
Balance Sheet
A company's financial statements showing the company’s revenues and expenses during a particular period.
Income statement
A comprehensive report on a company's activities and financial performance throughout the preceding year for shareholders and other interested people. It includes balance sheet and income statement.
Annual report
The current worth of a future sum of money or stream of cash flows given a specified rate of return. Formula: PV = FVt / (1 + r)t
Present value
The value of a current asset at a specified date in the future based on an assumed rate of growth over time. Formula: FVt = PV(1+r)t
Future value
Cash and other assets on balance sheet that are expected to be converted to cash within a year. Examples: cash, accounts receivable, inventory, marketable securities, prepaid expenses
Current assets
A company's debts or obligations on the balance sheet that are due within one year. Examples: short term debt, accounts payable, accrued liabilities and other debts.
Current liabilities
A business created as a distinct legal entity composed of one or more individuals or entities.
A commercial enterprise undertaken jointly by two or more parties that otherwise retain their distinct identities.
Joint venture
A business with one owner who pays personal income tax on profits from the business. It's easy to set up since there is little government regulation.
Sole proprietorship
A business or firm owned and run by two or more partners.
This is the primary goal of financial management.
Maximise values of shares
The market value of a firm is determined by its earning power and the risk of its underlying assets, and is independent of the way it chooses to finance its investments or distribute dividends.
Modigliani-Miller Theorem (M&M)
The interest rate you are charged if you go overdrawn on your current account. Also known as the Effective Annual Interest Rate (EAR). r = ( 1 + i n ) n − 1
Effective interest rate
An investment should be acceptable if its discounted payback is less than some pre-specified number of years.
Discounted payback rule
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