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14 Cards in this Set
- Front
- Back
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Describe the Balance Sheet |
-Its a snapshot of the firms assets and liabilities at a given point - Left Column: Assets ( CA- cash, A/R, Inv. FA- netplant and equip. TA) -Right Column: Liabilities (CL- A/P, notes pay. Long-term Debt) Owners Equity- common stock and Ret. Earn. Total Liab and OE |
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NWC equation and How do you incr. NWC |
NWC= Current assets- Current Liabilities
You must incr. CA to incr. NWC |
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What is liquidity and describe a liquid firm |
Its the ability to convert to cash quickly w/o significant loss in value
Liquid firms are less likely to experience financial distress, but liquid assets typically earn a lower return |
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Market Value Vs. Book Value |
Book Value is based on historical prices and is found on the Balance sheet
Market Value is the price at which you can buy or sell the assets, liabilities, or equities |
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What is the basic structure of an Income Statement |
Net Sales (Cogs) EBITDA (Depr. and Amor) EBIT (Interest expense) Taxable Income (Less Taxes) Net Income |
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General Info. about Income Statement |
Its more like a video of the firms operations for a specified period of time Report revenues first, then deduct any expenses for the period GAAP matching principle says to show revenue when it matches the expenses required to generate the revenue |
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What are Non-Cash Expenses |
Depreciation and Amoritization |
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Sources of Cash |
Cash Inflow- Occurs when you sell something and we add to the cash account Decrease in Asset Account Increase in Liability or Equity Account
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Uses of Cash |
Cash Outflow- Occurs when you "buy" something Increase in Asset Account Decrease in Liability or equity account |
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Free Cash Flow (FCF) |
The cash flow that the firm is (1) free to distribute to creditors and stockholders because it is (2) not needed for working capital or fixed asset investments.
Also called Cash flow from assets (CFA) |
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What is the DuPont equation and what does each part stand for and mean |
PM*TAT*EM=ROE PM- Profit Margin=(NI/Sales)- a measure of the firms profitability, how well it controls costs TAT- Total Asset Turnover =(sales/Total asset)- a measure of the firms asset use efficiency, how well it manages its assets EM- Equity Multiplier= (Total asset/Equity)- measure of the firms financial leverage |
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What do you do for common size analysis with the I/S and B/S |
B/S- compute all accounts as percent of total assets I/S- compute all line items as a percent of sales |
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What is Common Size analysis |
Makes it easier to compare financial information, particularly as the company grows
Useful for comparing companies of different sizes, especially within the same industry |
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Percentage Change |
Used to see how the firms performance is changing through time
Data is used form comparative years on I/S and B/S of the same organization |
