İŞLETME FİNANSI I - Deneme Sınavı - 9

Security is a kind of negotiable paper, showing claims on future cash flows of the issuer of the security.

Liquidity refers to convenience of money.

Customer value tells how much a customer thinks a product is worth.

Cost-benefit analysis is a technique used in decision-making that takes into account the estimated costs to be incurred by a proposed decision and the estimated benefits likely to arise from it.

Capital budgeting is a process of making long-term decisions on investment projects.

Capital structure (financial structure) refers to a company’s mixture of debt financing and equity financing maintained by the firm.

Share (stock) is a security representing an ownership in a corporation, and representing a claim on part of the corporation’s assets and earnings.

Dividend is the distribution of part of the profits of a company to its shareholders.

In vertical (or common size analysis), the items in the financial statements are expressed as a percentage of total assets or sales. The main advantage of vertical analysis is that such an analysis is not much affected by price fluctuations and that it lets industry-wide comparisons.

QuickRatio= (Cash+CashEquiv.+TradingSec.+Accts.Rec.+NotesRec.) / Current Liabilities

Current Assets = Total Assets - Fixed Assets = $240.000

Current Liabilities = Total Assets - Long-term Debts - Shareholders' Equity = $120.000

Current Ratio= Current assets/Current liabilities = $240.000 / $120.000 = 2

Net Working Capital is defined as the difference between the current assets and current liabilities of the same period.

Analysts often use the concept of sustainable growth as a way to evaluate a firm’s future growth rate. Sustainable growth rate refers to the rate at which a firm can grow if its profitability and financial policies do not change.

Price Earnings Ratio (P/E Ratio) This ratio is very important for shareholders or potential investors, because it gives the number of times EPS that investors are willing to pay for one share of stock. It is also called the “multiple”. Most analysts publish P/E ratios for various companies.

• Ratios are representations of average conditions that existed in the past, and are influenced by the selection of accounting methods (e.g., weighted average vs. FIFO cost flow; accelerated vs. straight line depreciation);

• Since financial statements are based on historical data, they do not reflect price level effects and real economic values;

• Computation of ratios are not standardized, and thus are influenced by data selection choices;

• Changes in many ratios are strongly associated with each other; e.g., changes in the current ratio and quick ratio between two different times are often in the same direction, and usually proportional. Therefore, it is not necessary to calculate all ratios, and interrelationships between/ among the ratios should be investigated;

• When ratios for the same company are compared over a period of time, care must betaken to analyzethe changes in operating conditions (e.g., changes in economic conditions, changes in product lines or geographic markets, changes in prices, levels of inflation, etc.); and

• When a specific firm is compared with similar firms, differences between/among the firms should be recognized (e.g., accounting policies, type of financing available, operating characteristics such as product lines, size and geographical location).

• The last, but the most important, consideration for the analysis is to obtain audited financial statements. Although unaudited statements might provide valuable information about a company, conclusions reached with this information are questionable, because its use brings up fair representation issues. Financial statement analysis is a multi-faceted issue. An analyst should consider all available techniques and ratios in order to produce useful reports to investors.

Quick Ratio, Or Acid Test provides a severe test of immediate liquidity, revealing a company’s ability to meet sudden demands upon liquid current assets.

quick ratio= current assets - inventories / short-term debt

= $100.000 - $ 30.000 / $70.000 = 1

Net working capital = Current assets - current liabilities = $100.000 - $70.000 = $30.000

The sum of liabilities and equity must be equal to assets.

Current ratio is found by dividing current assets to current liabilities. So 16200/5400=3 is the current ratio for 2015.

Accrual acounting is used to measure the full effects of an economic transaction which takes place within an accounting period regardless of the timing of cash outcomes.