Financial Concepts Flashcards

Vocabulary flashcards from lecture notes on financial concepts, focusing on Free Cash Flow (FCF), Net Working Capital (NWC), Weighted Average Cost of Capital (WACC), Internal Rate of Return (IRR), Net Present Value (NPV), Economic Value Added (EVA), Market Value Added (MVA), Discounted Cash Flow (DCF), and Return on Invested Capital (ROIC).

Positive Change in Net Working Capital

A decrease in Free Cash Flow, as more cash is tied up in operational assets.

WACC

Reflects the opportunity cost of capital from both debt and equity holders.

IRR > WACC

The project earns more than its cost of capital, creating value.

NPV > 0

Accept the project.

IRR > WACC

Accept the project.

High ROIC relative to WACC

The company is generating value above its cost of capital.

EVA

Annual value creation.

MVA

Total market value created over time.

DCF Valuation

Intrinsic valuation based on projections.

Comparables Valuation

Market-based valuation using relative metrics.