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50 Cards in this Set

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The price at which the assets, liabilities, or equity can actually be bought or sold:
Market value
The balance sheet provides the _____ of all assets, liabilities, and equity.
Book value
Financial statement that summarizes the firm's performance for a particular period of time:
Income statement
Tax rate that is used for computing a company's total tax liability:
Average tax rate
What provides the book value of all assets, liabilities, and equity?
Balance sheet
Financial statement showing the financial position of the firm at a specific point in time:
Balance sheet
The percentage paid (amnt of tax payable) on the next dollar earned:
Marginal tax rate
Decisions that involve the choice of whether to borrow money (debt) or issue new ownership shares (equity) to buy the asset:
Financing decisions (right side)
Financial statement that reports the impact of a firm's operating, investing, and financing activities over a period of time:
Statement of cash flows
Tax rate that is relevant for calculating cash flows from new projects:
Marginal tax rate
What type of asset would a truck or computer be?
Tangible asset
How are assets listed?
In order of liquidity
What part of the income statement refelects financing decisions?
Bottom half (EBIT to NI)
What type of asset would a trademark or patent be?
Intangible asset
What financial statement lists where cash was obtained and where it was used for a particular period?
Statement of cash flows
What is the difference between current vs. fixed assets?
CURRENT - convert to cash < 1 year

FIXED - convert to cash in longer than 1 year
The residual value belonging to the shareholders after subtracting total debt from assets:
Owner's Equity
What is the balance sheet identity?
Assets = Liabilities + Owner's Equity
What is the difference b/t current vs. long-term debt?
CURRENT: Debt coming due in < 1 year

LONG-TERM: Debt coming due in more than 1 year
Highly liquid assets have what 2 characteristics?
1) Ease of conversion to cash
2) Without significant loss of value
Decisions that involve the purchase and sale of any assets (not just financial assets):
Investment decisions (left side)
The more debt a firm has, the greater its degree of ____.
Financial leverage
Market value vs. Book value

Which is more important to the decision-making process?
Market value
Practice of GAAP which says to show revenue when it accrues and match the expenses required to generate the revenue:
Matching principle
Total taxes paid divided by total taxable income:
Average tax rate
What do excessive liquid assets provide?
Lower returns
Part of the income statement that reflects operating decisions:
Top half (Sales to EBIT)
Why are book values not that useful for making decisions about the future?
Because of the historical nature of the numbers.
Equity holders are entitled only to ____ cash flows and assets.
Residual
For accounting purposes, revenue is shown on the income statement when it ____, not when payment is received.
Accrues
The net amount spent on fixed assets:
Capital spending
The use of debt financing:
Financial leverage
The ____ tax rate is generally the relevant rate for financial decision-making.
Marginal
The cash flow resulting from a firm's day-to-day operations:
Operating cash flow (OCF)
Total taxes paid divided by total taxable income:
Average tax rate
The use of debt in a firm's capital structure:
Financial leverage
What are the 2 financial statements that measure the flow of funds into and out of various accounts over time?
1) Income statement
2) Statement of cash flows
What is one way to correct an agency problem?
Tying the manager's salary to the value of the firm
Which of the following is a source of cash?

a) The purchase of new fixed assets
b) Dividends paid
c) The repurchase of outstanding common stock
d) A decrease in inventory
e) A decrease in long-term debt
d) A decrease in inventory
Balance sheet assets are listed in order of:
Decreasing liquidity
What sign should Operating cash flow (OCF) have? Why?
OCF should be positive – firm should be making money
What has occured if our Ending Net Fixed Assets > Beginning Net Fixed Assets?
This means that NCS (+) and we used cash to purchase our fixed assets.
What has occured if CF to Creditors and CF to Stockholders are (+)?
Means that we paid money out to creditors and/or stockholders
What does a (+) NCS mean? What about a (-) NCS?
(+) NCS means we are using cash

(-) NCS means we are generating cash
What has occured if CF to Creditors CF to Stockholders are negative (-)?
Means that the money flowed away from the creditors and stockholders and we received money from them.
What does a (+) change in NWS mean? What about a (-) change in NWS?
(+) Change in NWC means we are using cash.

(-) Change in NWC means we are generating cash.
What can we tell from a (+) CFFA?
The firm made more $$ than it used. (+) means the firm paid more $$ to creditors and stockholders than it received by taking on more debt and equity. We see that more of this money flowed out to stockholders.
What has occured if our Ending NWC > Beginning NWC?
Means that our change in NWC (+) and we used cash to fund NWC
What can we tell from a (-) CFFA?
The firm raised cash from creditors and stockholders
What does a (+) CFFA mean? What about a (-) CFFA?
(+) CFFA means that we are generating cash.

(-) CFFA means that we are using cash.