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Cards In This Set
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What is the balance sheet identity?
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Assets = Liabilities + Stockholders' Equity
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What is net working capital?
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The difference between a firm's current assets and its current liabilities.
The ability for a firm to cover its debts. NWC = Current assets - Current Liabilities |
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What is the difference between working capital and net working capital?
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Working capital technically means current assets.
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When is an item an asset?
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If it is going to generate cash in the future.
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What is the value of an asset?
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The present value of the future cash flow.
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In what order are financial statements presented?
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Income Statement, Statement of Retained Earnings, Balance Sheet, Stmt of Cash Flows
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How is the Income Statement presented?
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Name of the companyDateSalesLess: CostsLess: DepreciationEquals: EBITLess: InterestEquals: EBTLess: TaxesEquals: Net Income
Net income goes to RE statement |
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Who is the statement of RE presented?
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Company NameDateBeginning BalanceAdd or Subtract: Net IncomeEquals: Earnings AvailableLess: DividendsEquals: Ending Balance
Ending Balance goes to Balance Sheet |
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How is the Balance Sheet presented?
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Assets:Current assets (Cash, Mktbl Securities/short-term investments, A/R, Inventory), noncurrent Assets (P,P&E, /Fixed Assets, Long-term investments, Intangibles)Liabilities:Current liabilities (A/P, N/P, Short-term loans, Curent maturities of long-term debt, Wages payable, Taxes Payable)Noncurrent Liabilities (Long-term Debt)Equity:Common Stock (# shares issued x par value)Additional Paid-in CapitalRetained Earnings (NOT cash)
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What are the three basic principles of finance?
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Get the cash, get the cash, get the cash
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What is the statement of cash flows? What components make up the statement of cash flow?
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A firm's financial statement that summarizes its sources and uses of cash over a specified period.Operating activities (always first), Investing activities, financing activities
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What is liquidity?
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The speed and ease with which an asset can be converted to cash.
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What is financial leverage?
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The use of debt in a firm's capital structure. The more debt a firm as (as a % of assets), the more financial leverage it has. It can result in greater rewards to shareholders, but also can increase risk of business failure.
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What is the difference between book and market value?
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Book value is historical cost, less accumulated depreciation.Market value is the amount the asset could be sold for today.
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What is the income statement equation?
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Revenues - Expenses = Income
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