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35 Cards in this Set
- Front
- Back
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Balance Sheet
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Financial statement that shows the firm’s assets and liabilities at a particular time
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Common-size balance sheet
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All items in the balance sheet are expressed as a percentage of total assets
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Generally accepted accounting principles (GAAP)
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Procedures for preparing financial statements
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Book value
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Value of assets or liabilities according to the balance sheet
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Income statement
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Financial statement that shows the revenues, expenses, and net income of a firm over a period of time
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Common-size income statement
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All items on the income statement are expressed as a percentage of revenues
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Statement of cash flows
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Financial statement that shows the firm’s cash receipts and cash payments over a period of time
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Free cash flow
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Cash available for distribution to investors after firm pays for new investments or additions to working capital
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Marginal tax rate
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Additional taxes owed per dollar of additional income
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Average tax rate
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Total taxes owed divided by total income
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Fixed Assets
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Tangible fixed assets
Property, plant, and equipment Less accumulated depreciation Not tangible fixed assets |
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Current Assets
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Cash and marketable securities
Receivables Inventories Other current assets Total current assets |
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Assets
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Fixed assets
Current assets Intangible Assets (Goodwill) Long-term investments Other assets |
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Current liabilities
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Debt due for repayment
Accounts payable Other current liabilities Total current liabilities |
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Shareholders’ equity
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Common stock and other paid in capital
Retained earnings Treasury stock Total shareholders equity |
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Liabilities and Shareholders’ Equity
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Current liabilities
Long-term debt Deferred income taxes Other long-term liabilities Shareholders’ equity |
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Stockholders' equity equation
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Stockholders equity=total assets-total liabilities
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Book value = ?
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Original value
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Market value =?
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Current value
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Market values don't =
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Book value!
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Shareholders focus most on book value or market value?
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Market Value
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The difference between the market values or assets and liabilities?
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-the market value of the shareholders’ equity claim
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The stock price is?
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-simply the market value of the shareholders’ equity divided by the # of outstanding shares
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Market value generally ? book value.
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-exceeds
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Income statement shows what?
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-shows how profitable the firm has been during the past year
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EBIT equation
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Earnings before interest and taxes (EBIT) =
total revenues- costs-depreciation |
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Why cash and profits are not the same:
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1. Depreciation.
2. Cash versus accrual accounting. |
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Cash Flow differences from its Net Income:
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1. The income statement does not recognize capital expenditures as expenses in the year that the capital goods are paid for. Instead, it spreads those expenses over time in the form of an annual deduction for depreciation.
2. The income statement uses the accrual method of accounting, which means that revenues and expenses are recognized when sales are made, rather than when the cash is received or paid out. |
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Statement of cash flows 3 sections:
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1. cash flow from operations (normal business activities)
2. cash flow from investments (plant and equipment) 3. cash flows from financing activities (such as the sale of new debt or stock) |
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Statement of cash flows tracks what?
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-tracks the cash flows from all the firm’s activities
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Free cash flow equation
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Free cash flow= (EBIT) Earnings before interest and taxes – taxes + depreciation
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What is the marginal rate of tax on income for large companies?
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35%
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Balance sheet shows
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Shows firm’s assets and liabilities
-the difference between the assets and the liabilities represents the amount of the shareholders’ equity |
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Income statement shows
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Measures the profitability of the company during the year, and also the difference between revenues and expenses
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Statement of cash flows shows
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Measures the sources and uses of cash during the year, the change in the company’s cash balance is the difference between sources and uses.
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