Rates of return
Increases with risk (standard deviation)
In excess of inflation
Treasury bills
Treasury notes
Corporate bonds
Common stocks
What determines interest rates?
Risk-free rate (k*) plus
Premiums
Inflation risk
Default risk
Maturity length
Liquidity
Basic financial statements
Income statement
Balance sheet
Statement of cash flows
Operations
Financing activities
Investing activities
Financial ratio analysis
Liquidity
Current ratio
Acid test
Receivables turnover
Inventory turnover
Profitability
return on investment
return on sales (net profit margin)
Financial structure
debt ratio
times interest earned
return on equity
Economic Value Added (EVA) takes into account cost of capital
Time value of money
Future value of a lump sum
Present value of a lump sum
Future value of an annuity
Present value of an annuity
Annuity due
Amortized loans
Risk and rates of return
Expected return
Weighted return
Risk
Required rate of return
Concept
Capital Asset Pricing Model (CAPM)
kj = krf + bj(km-krf)
Increases with risk (standard deviation)
In excess of inflation
Treasury bills
Treasury notes
Corporate bonds
Common stocks
What determines interest rates?
Risk-free rate (k*) plus
Premiums
Inflation risk
Default risk
Maturity length
Liquidity
Basic financial statements
Income statement
Balance sheet
Statement of cash flows
Operations
Financing activities
Investing activities
Financial ratio analysis
Liquidity
Current ratio
Acid test
Receivables turnover
Inventory turnover
Profitability
return on investment
return on sales (net profit margin)
Financial structure
debt ratio
times interest earned
return on equity
Economic Value Added (EVA) takes into account cost of capital
Time value of money
Future value of a lump sum
Present value of a lump sum
Future value of an annuity
Present value of an annuity
Annuity due
Amortized loans
Risk and rates of return
Expected return
Weighted return
Risk
Required rate of return
Concept
Capital Asset Pricing Model (CAPM)
kj = krf + bj(km-krf)