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80 Cards in this Set

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