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50 Cards in this Set
- Front
- Back
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The price at which the assets, liabilities, or equity can actually be bought or sold:
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Market value
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The balance sheet provides the _____ of all assets, liabilities, and equity.
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Book value
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Financial statement that summarizes the firm's performance for a particular period of time:
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Income statement
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Tax rate that is used for computing a company's total tax liability:
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Average tax rate
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What provides the book value of all assets, liabilities, and equity?
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Balance sheet
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Financial statement showing the financial position of the firm at a specific point in time:
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Balance sheet
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The percentage paid (amnt of tax payable) on the next dollar earned:
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Marginal tax rate
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Decisions that involve the choice of whether to borrow money (debt) or issue new ownership shares (equity) to buy the asset:
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Financing decisions (right side)
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Financial statement that reports the impact of a firm's operating, investing, and financing activities over a period of time:
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Statement of cash flows
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Tax rate that is relevant for calculating cash flows from new projects:
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Marginal tax rate
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What type of asset would a truck or computer be?
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Tangible asset
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How are assets listed?
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In order of liquidity
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What part of the income statement refelects financing decisions?
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Bottom half (EBIT to NI)
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What type of asset would a trademark or patent be?
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Intangible asset
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What financial statement lists where cash was obtained and where it was used for a particular period?
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Statement of cash flows
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What is the difference between current vs. fixed assets?
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CURRENT - convert to cash < 1 year
FIXED - convert to cash in longer than 1 year |
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The residual value belonging to the shareholders after subtracting total debt from assets:
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Owner's Equity
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What is the balance sheet identity?
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Assets = Liabilities + Owner's Equity
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What is the difference b/t current vs. long-term debt?
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CURRENT: Debt coming due in < 1 year
LONG-TERM: Debt coming due in more than 1 year |
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Highly liquid assets have what 2 characteristics?
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1) Ease of conversion to cash
2) Without significant loss of value |
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Decisions that involve the purchase and sale of any assets (not just financial assets):
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Investment decisions (left side)
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The more debt a firm has, the greater its degree of ____.
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Financial leverage
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Market value vs. Book value
Which is more important to the decision-making process? |
Market value
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Practice of GAAP which says to show revenue when it accrues and match the expenses required to generate the revenue:
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Matching principle
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Total taxes paid divided by total taxable income:
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Average tax rate
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What do excessive liquid assets provide?
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Lower returns
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Part of the income statement that reflects operating decisions:
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Top half (Sales to EBIT)
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Why are book values not that useful for making decisions about the future?
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Because of the historical nature of the numbers.
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Equity holders are entitled only to ____ cash flows and assets.
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Residual
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For accounting purposes, revenue is shown on the income statement when it ____, not when payment is received.
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Accrues
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The net amount spent on fixed assets:
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Capital spending
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The use of debt financing:
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Financial leverage
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The ____ tax rate is generally the relevant rate for financial decision-making.
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Marginal
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The cash flow resulting from a firm's day-to-day operations:
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Operating cash flow (OCF)
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Total taxes paid divided by total taxable income:
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Average tax rate
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The use of debt in a firm's capital structure:
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Financial leverage
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What are the 2 financial statements that measure the flow of funds into and out of various accounts over time?
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1) Income statement
2) Statement of cash flows |
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What is one way to correct an agency problem?
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Tying the manager's salary to the value of the firm
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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
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Balance sheet assets are listed in order of:
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Decreasing liquidity
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What sign should Operating cash flow (OCF) have? Why?
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OCF should be positive – firm should be making money
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What has occured if our Ending Net Fixed Assets > Beginning Net Fixed Assets?
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This means that NCS (+) and we used cash to purchase our fixed assets.
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What has occured if CF to Creditors and CF to Stockholders are (+)?
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Means that we paid money out to creditors and/or stockholders
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What does a (+) NCS mean? What about a (-) NCS?
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(+) NCS means we are using cash
(-) NCS means we are generating cash |
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What has occured if CF to Creditors CF to Stockholders are negative (-)?
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Means that the money flowed away from the creditors and stockholders and we received money from them.
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What does a (+) change in NWS mean? What about a (-) change in NWS?
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(+) Change in NWC means we are using cash.
(-) Change in NWC means we are generating cash. |
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What can we tell from a (+) CFFA?
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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.
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What has occured if our Ending NWC > Beginning NWC?
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Means that our change in NWC (+) and we used cash to fund NWC
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What can we tell from a (-) CFFA?
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The firm raised cash from creditors and stockholders
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What does a (+) CFFA mean? What about a (-) CFFA?
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(+) CFFA means that we are generating cash.
(-) CFFA means that we are using cash. |
