Financial Mathematics and Corporate Finance Lecture Notes

Comprehensive vocabulary flashcards covering financial mathematics, loan amortization systems, business balance sheet analysis, and investment project evaluation criteria based on the lecture notes.

Economic Goods in Finance

From a financial perspective, time is considered a negative economic good.

Rational Discount

A financial operation where the price is calculated based on the initial capital and is paid at the end of the term.

Commercial Discount

A financial operation where the price is calculated based on the final capital and is paid at the beginning of the term.

Capitalization

A financial operation used to obtain the equivalent of a current capital at a future point in time.

Updating (Actualización)

A financial operation used to obtain the equivalent of a future capital at the current point in time.

TIN (Tipo de Interés Nominal)

A nominal interest rate that always has an annual base; it is not an indicator of the effective cost or yield.

TAE (Tasa Anual Equivalente)

An indicator of the effective cost or yield of a financial operation, incorporating commissions and fees.

Simple Regime Interest

A financial system where interests are produced exclusively by the initial capital.

Compound Regime Interest

A financial system where the capital that produces interests is the sum of the initial capital and accumulated interests.

Mean Maturity (Vencimiento Medio)

The maturity point reached when several capitals are substituted by a single capital equal to the sum of all of them.

Common Maturity (Vencimiento Común)

The maturity point reached when several capitals are substituted by a single capital of any value.

Deferred Rent (Renta Diferida)

A financial rent where the initial valuation is performed several periods before the start (origin) of the rent.

Anticipated Rent (Renta Anticipada)

A financial rent where the final valuation is performed several periods after the end of the rent.

Postpayable Rent (Renta Pospagable)

A rent where the payments or installments are due at the end of each period.

Prepayable Rent (Renta Prepagable)

A rent where the payments or installments are due at the beginning of each period.

Financial Rental Value

The financial equivalent of the series of capital payments at a specific point in time.

Perpetual Constant Rent Valorization

The initial value is equal to the capital of the rent divided by the interest rate: $V_0 = \frac{C}{i}$.

Amortization Installment (Cuota de Amortización)

The specific amount of a loan payment destined to repay the principal or original loan amount.

Lineal Amortization Method

A method where amortization installments are constant and the total periodic payment (amortization term) decreases over time in an arithmetic progression.

French Amortization Method

A system where the periodic payment (amortization term) is constant, and the amortization installments increase according to a geometric progression.

Loan Usufruct

The current value of the pending interest installments valued at the market interest rate.

Bare Property (Nuda Propiedad) of a Loan

The current value of the pending amortization installments or capital repayments valued at the market interest rate.

Euribor

A daily reference interest rate indicating the average rate at which financial institutions lend money to each other in the interbank market.

Partial Grace Period (Carencia Parcial)

A stage in a loan where the borrower only pays interest and does not repay any principal capital.

Total Grace Period (Carencia Total)

A stage in a loan where neither interest nor principal is paid, resulting in higher absolute financial costs in compound interest regimes.

Working Capital (Fondo de Maniobra / Capital Circulante)

The excess of current assets over current liabilities, calculated as $AC - PC$.

Mean Operating Cycle (Periodo Medio de Maduración)

The average time that elapses from when a company invests a monetary unit in its activity until it is recovered.

Technical Bankruptcy (Quiebra Técnica)

A situation where a company's liabilities exceed its total assets ($Pasivo > Activo$).

Spontaneous Financial Sources

Funding that arises automatically as a result of delaying payments in the usual operations of the company.

Economic Result

The yield of the economic structure before remunerating the creditors.

Financial Result

The part of the economic result remaining after the company has remunerated its creditors.

Nominal Value of a Share

The portion of the company's social capital represented by a single share.

Issue Premium (Prima de Emisión)

The additional amount paid above the nominal value when new shares are issued, which constitutes a form of reserve.

Financial Leasing (Arrendamiento Financiero)

An operation where the lessee uses an asset and has the option to acquire it at the end of the term by paying a purchase option fee.

Zero-Coupon Bond (Empréstito Cupón Cero)

A debt instrument where all interest is paid at once at the moment of amortization/maturity.

Cost of Capital (K)

The minimum required rate of return an investment must offer to maintain or increase the investor's wealth.

WACC (Coste Medio Ponderado de Capital)

The average weighted cost of all financial resources, representing the minimum economic return needed to increase shareholder wealth.

NPV (Valor Actual Neto / VAN)

A criterion assessing investment profitability as the difference between the current value of economics flows and the initial investment.

IRR (Tasa Interna de Rentabilidad / TIR)

The interest rate that makes the NPV of an investment project equal to zero; it measures relative net profitability.

Global NPV (VANG)

An investment criterion that explicitly considers a specific reinvestment rate for positive cash flows.

Payback Period (Plazo de Recuperación)

The time required to recover the initial investment; investments with shorter periods are generally preferred.

Cost-Benefit Ratio

An investment selection criterion where projects are accepted if the ratio of the present value of benefits to costs is greater than $1$.