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80 Cards in this Set
- Front
- Back
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6 Elements of Business Acumen
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"As outlined in Ram Charan's What the CEO Want You to Know:
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Cash Generation
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Cash In - Cash Out, the "oxygen" of a business
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Margins
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"The % of money left after all the bills are paid
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Velocity
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"Speed at which investments move
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Inventory Turns
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Cost of Goods Sold/Inventory
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Returns
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"ROA = EBIT/Assets
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Assets
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Things a company owns (Inventory, PPE, Accounts Receivable, etc.)
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Revenue Growth
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"Increasing share in a growing market is the goal
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Customers
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"The ONLY source of sustainable external cash flow
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3 Main Parts to an Annual Report
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"1) Letter to shareholders (broad overview from CEO)
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Financial Statements
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"1) Balance Sheet
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Balance Sheet
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"Provides info about company's financial condition (solvency and liquidty) on a specific date
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Current Assets
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"Cash and those assets that will be turned into cash within one business cycle (1 year)
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Fixed Assets
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"Assets not intended for sale (used to manufacture, display, warehouse and transport company products and house employees)
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Marketable securities
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short term securities that are readily saleable
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Quick Assets
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"Cash, Marketable Securities and Accounts Receivable
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Days of Cash
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"(Revenue - Income)/(working days)
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Depreciation
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"Way of giving each fiscal period ""its fair share"" of fixed assets, write-off a certain amount of the original cost of the asset each year
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Deferred Charges
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Investments that will benefeit future periods (beyond 1 year)
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Goodwill
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"When a company buys another company (acquisition) the difference between the price and the asset value (net book) value of the company is considered GOODWILL
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Investment securities
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Debt securities carried with the intention of holding to maturity
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Liabilities
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What a company owes
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Current Liabilities
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"Due or payable within 12 monts
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Accounts payable
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money owed to suppliers for purchas of products
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Accrued expenses
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"money owed to business creditors for routine purchases
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Bonds
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"a loan or an IOU, legal document with periodic interest payments (usually semi-annual)
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Reasons Bond Values Fluctuate
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"1) Interest rates change
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Current Ratio
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"Current Assets/Current Liabilities
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Quick Ratio
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"Quick Assets/Current Liabilities
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Working Capital
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"The amount of assets left after all the debts are paid
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Preferred Stock
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"Owners' Equity extended to special investors and sometimes executives
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Common Stock
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"Owner's Equity Shares you buy
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Additional Paid-in capital
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"Stockholder payments in excess of par value or stated value of each share
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Retained Earnings
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"Accumulatd profits the company reinvests in itself or ""retains"" in the company
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Treasury Stock
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"Stock repurchased by issuer
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Debt to Equity
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"Total Liabilities/Total Equity
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Financial Leverage
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"Total Assets/Total Equity
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Chapter 11 Bankruptcy
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"When cash goes to ZERO
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Income Statement
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A statement by a company to describe the profit (loss) that a company has made during a SPECIFIC TIME PERIOD (quarter or fiscal year)
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Structure of Income Statement
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"Net Sales
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Net Sales
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The top line on the income statement (netted with returned goods and discounts)
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Cost of Sales/ (COGS)
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"Cost to purchase and convert material into products
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Gross Margin
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Gross Profit/Revenue
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EBIT
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"Earnings Before Interest and Tax
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3 Methods for costing inventory
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"Average Cost
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Depreciation
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"A cost allocation accounting method to distribute capital costs across the periods of their useful life to accurately reflect ""period profits""
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Amortization
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allocation of the cost of INTANGIBLE assets
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Depletion
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allocation of the cost of natural resource assets (i.e.: oil)
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Straight line depreciation
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"Equal amount of depreciation used each year
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Accelerated depreciation
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"If the revenues from an asset decline with age, or if maintenance and repairs increase over time, accelerated depreciation can be used to compensate
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Earnings per share (EPS)
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Net Income/# of capital stock shares
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P/E Ratio
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"Current Market Price of Stock/
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Return on Equity
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Income/Equity
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Return on Assets
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EBIT/Assets
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Inventory Turns
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COGS/Inventory
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Return on Sales Ratio
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Net Income/Revenue
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Market Capitalization ("Market Cap")
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"the value of a company on the stock market
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Accrual Accounting
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used in the INCOME STATEMENT to reflect expenses and income over a period
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Exact Accounting
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"snapshot" of a particular point in time, used in BALANCE SHEET
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Exact or "combination" accounting
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the difference in two snapshots…used in the CASH FLOW STATEMENT
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Days of AR
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"Accts. Receivable/Revenue per day
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AR T/O
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"Revenue/Accounts Receivable
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"COGS holding time"
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inventory
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Days of Inventory
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"Inventory/(COGS/day)
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Inventory and operating expenses bought on credit and not paid for yet
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Accounts Payable
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Days of AP
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"AP/(COGS/day)
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AP Turnover
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COGS/Accts. Payable
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Prepaid operating expenses
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"insurance, property taxes, bulk supplies, anything paid in advance
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Accrued Operating expenses
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"Internally generated expenses
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Notes Payable
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"Borrowed Money
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Economic Value Added
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"looking at a business and asking if they are getting a rate of return on capital that's greater than their cost of capital. It's a straightforward way of asking: ""Are they creating shareholder value?""
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Du Pont Model
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"developed by F. Donaldson Brown
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3 areas of Cash Flow
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"1) From Operating Activities
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Balance Sheet interactions with Cash Flow
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"Cash Flow uses the difference between beginning of year balance and end of year balance
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The Depreciation Story
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"1) Capital assets are a cash flow out when the asset is bought (Cash Flow/Investing)
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Cash flows from financing activities
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"If a company is low on cash and can't fund operations…
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Cash vs. Profits
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"PROFITS = tell us if the company made money in its operations for the period
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"Cooking the books"
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"FRAUD
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3 Key Financial Aspects of a Business
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"1) Cash Flows
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Times Earned Interest Ratio (TIER)
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"Operating Earnings/Interest Expense
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