Finance Principles - Homework #1
Dr. Choi
(Due: Tuesday, February 11)

All answers must be typed. Show all of your work for numerical problems.
** Homework must be done independently.**

“I attest that this is my own work and that I have abided by the Howard University Code of Student Conduct. I have neither given nor received any type of help, except as specifically permitted by the professor.”

11/11/14
Student’s Signature

Date

1. Define or explain each of words and phrase listed below.

1) Corporate finance- The financial activities related to running a corporation.
2) Net working capital- a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity.
3) Capital budgeting- planning process used to determine whether an organization's long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth the funding of cash through the firm's capitalization structure.
4) Capital structure- refers to the way a corporation finances its assets through some combination of equity, debt, or hybrid securities.
5) Marginal tax- the tax rate describes the burden ratio at which a business or person is taxed
6) Average tax- The total amount of taxes paid by an individual or business divided by taxable income.
7) Unlimited liability- is a type of investment in which entails an indefinite extent of a liability to pay a firm's debts or obligations, to extend beyond the firm's.
8) Double taxation- the levying of tax by two or more jurisdictions on the same declared income, asset, or financial transaction. This double liability is often mitigated by tax treaties between countries.
9) Common-size- income statement- An income statement in which each account is expressed as a percentage of the value of sales.
10) Peer-group analysis- the practice of comparing a firm's results to those of similar companies or competitors.
11) Liquidity- the availability of liquid assets to a market or company
12) Time value of money- the principle that a certain currency amount of money today has a different buying power than the same currency amount of money in the future.
13) Discounting- deduct an amount from (the usual price of something).
14) Compounding- The ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings.
15) Standardized financial statement- It is a standard practice for businesses to present financial statements that adhere to generally accepted accounting principles (GAAP), to maintain continuity of information and presentation across international borders.
16) Common-size balance sheet- A common size balance sheet presents not only the standard information contained in a balance sheet, but also a column that notes the same information as a percentage of the total assets (for asset line items) or as a percentage of total liabilities and shareholders' equity
17) Simple interest- interest paid on the principal alone.
18) Compound interest- interest calculated on both the principal and the accrued interest.
19) Cash ratio-The reserve requirement is a central bank regulation employed by most, but not all, of the world's central banks, that sets the minimum fraction of customer deposits and notes that each commercial bank must hold as reserves.
20) Cash coverage ratio- A measure of a company's ability to meet its financial obligations. In broad terms, the higher the coverage ratio, the better the ability of the enterprise to fulfill its obligations to its lenders.
21) IPO- The first sale of stock by a private company to the public.
22) EPS- The portion of a company's profit allocated to each outstanding share of common stock.
23) Secondary market- the financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold.
24) Auction market- The