FRL 300 Midterm Exam 1 Study Guide Winter 2014 Chapter 1: Conceptual (4 questions) . The goal of financial management . Characteristics of the corporation vs. the sole proprietorship Chapter 2: Conceptual (4 questions) . Cash flow from assets . Operating cash flow . Left and right sides of the balance sheet Chapter 2: Computational (5 questions) . Net working capital and change in net working capital . Cash flow to creditors (remember that net new borrowing is the change in long-term debt) . Cash flow to stockholders . Operating cash flow . Right and left sides of the balance sheet . Market value vs. book value Chapter 3: Conceptual (3 questions) . The purpose of financial ratios . Sources and uses of cash . Price-earnings and PEG ratios and how to interpret them Chapter 3: Computational (3 questions) . Common-size (CS) balance sheet and income statement . Remember that CS balance sheet values are a percentage of total assets. . Remember that CS income statement values are a percentage of sales. . Price-earnings ratio . Remember that earnings = net income. . Remember that earnings per share (EPS) = net income / shares outstanding. . Profit margin . Days sales in inventory and what it tells you Chapter 4: Conceptual (3 questions) . Sustainable growth rate . Questions addressed by financial planning . Ingredients of a financial planning model (and what is the first ingredient?) Chapter 4: Computational (3 questions) . Pro forma financial statements . External financing needed (EFN) . Internal growth rate . ROA . Retention ratio . Sustainable growth rate . ROE . Payout ratio (remember the relationship between payout ratio and retention ratio)