Analysis For Financial Management 01

Front 1

balance sheet

Back 1

a financial snapshot

of all the assets the company owns

and all the claims against those assets.

Front 2

assets = ___ + ____

Back 2

liabilities + shareholders' equity

Front 3

current asset

Back 3

any asset or liability that will turn into cash within one year. all else is long-term

Front 4

earnings

Back 4

measure the extent to which net sales generated during the accounting period exceeded expenses incurred in producing the sales

Front 5

earnings aka

Back 5

profits or income

Front 6

accrual principle means

Back 6

revenue is recognized

at time of sale

not when customer pays

Front 7

two types of depreciation

Back 7

straight line

accelerated

Front 8

accelerated depreciation

Back 8

more depreciation in early years of asset's life

Front 9

two sets of financial records

Back 9

managing and reporting to shareholders

minimize taxes

Front 10

net income

Back 10

net profit
proverbial bottom line
total revenue less total expenses

Front 11

operating income

Back 11

profit from day-to-day operations excluding taxes, interest income, expense, and extraordinary items

Front 12

pro forma earnings aka

Back 12

core earnings
ongoing earnings
operating earnings

Front 13

pro forma earnings

Back 13

total revenues less total expenses, omitting any and all expenses the company believes might cloudinvestor perceptions of the true earning power of the business.

Front 14

a company generates cash in two ways:

Back 14

by reducing an asset

increasing a liability

Front 15

cash flow statement classifies the cash flows according to

Back 15

operating activities

long term investing activities

financing activities

Front 16

cash is used in two ways

Back 16

to increase an asset account

to reduce a liability account

Front 17

sources and use statements

Back 17

poor man's cash flow statement

total use must equal total source

place balance sheets side by side and see if source or use

Front 18

increases in liabilities and decreases in assets are

Back 18

sources of funds

Front 19

increases in assets and decreases in liabilities are

Back 19

uses of funds

Front 20

goodwill

Back 20

The value of a business to a purchaser over and above its net asset value. It reflects the value of intangible assets like:

* reputation
* brand name
* good customer relations
* high employee morale

and other factors which improve the company's business.

Front 21

amortize

Back 21

liquidate gradually

the distribution of a single lump-sum cash flow into many smaller cash flow installments, as determined by an amortization schedule.

Front 22

amortization (accounting)

Back 22

gradual recognition of certain expenses associated with intangible assets

such as trademarks, copyrights, goodwill and so on,

typically over a period of several years.

Front 23

cash flow

Back 23

movement of money

into or out of a cash account

over a period of time

Front 24

book value definition

Back 24

1. The value at which an asset is carried on a balance sheet.

2. The net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities.

Front 25

uses of book value

Back 25

the accounting value of a firm.

1. It is the total value of the company's assets that shareholders would theoretically receive if a company were liquidated.

2. By being compared to the company's market value, the book value can indicate whether a stock is under- or overpriced.

Front 26

What's the difference between book and market value?

Back 26

Book value is the price paid for a particular asset. This price never changes so long as you own the asset.

On the other hand, market value is the current price at which you can sell an asset.

For example, if you bought a house 10 years ago for $300,000, its book value for your entire period of ownership will remain $300,000. If you can sell the house today for $500,000, this would be the market value.

Book values are useful to help track profits and losses. If you have owned an investment for a long period of time, the difference between book and market values indicates the profit (or loss) incurred.