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51 Cards in this Set
- Front
- Back
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Finance |
-Identify necessary resources -Determine best way to buy resources -Manage resources efficiently |
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FINANCIAL STATEMENT |
Provide raw data about a company, for making financial decisions |
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BALANCE SHEET: |
-Listing of asset of liabilities as of a point in time |
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STATEMENT OF CASHFLOW |
-Reports of cash in and cash out for a period of time |
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INCOME STATEMENT |
-Report of how muchmoney a company made during a period of time |
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Accounting |
Quantitative: Numbers Financial: Money Useful: Practical Decisions: use past decisions to guide future ones |
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RESOURCES |
AKA assets |
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Obligations |
AKA liabilities |
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ACCOUNTING EQUATION |
Assets = Liabilities + Equity |
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LIABILITIES |
-Borrow with Loans |
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EQUITY |
Investments by Shareholders |
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RETAINEDEARNINGS |
-Profits generated that have been kept inthe company |
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INCOME STATEMENTS |
-Revenues - Expenses = Net Income |
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Operating Activities (INFLOW) |
-Selling goods -Providing Services |
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Investing Activities (INFLOW) |
-Selling building -Selling land |
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Financing Activities (INFLOW) |
-BorrowingMoney -ReceivingInvestments |
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Inflow and Outflow of CASH |
-Operating Activities -Investing Activities -Financing Activities |
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Operating Activities (OUTFLOW) |
-Paying wages -Paying utilities -Paying taxes |
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Investing Activities (OUTFLOW) |
-Purchasing |
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Financing Activities (OUTFLOW) |
-Repaying loans -Distributions to owners |
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Financial Ratio |
-One financial statement number divided by another |
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DEBT RATIO |
-A measure of leverage |
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LEVERAGE |
-Thedegree to which a company has borrowed money |
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DEBT RATIO |
Total Liabilities ------------------------- Total assets |
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CURRENT RATIO |
-Ameasure of liquidity |
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LIQUIDITY |
-The abilityof the company to pay its obligations in the short term |
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CURRENT ASSET |
-Assetsyou expect to use within the current year |
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CURRENT LIABILITIES |
-Obligationsyou expect to pay within the current year |
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Current ratio |
Current assets ------------------------- Current liabilties |
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RETURN OF SALES |
A measure ofthe amount of profit earned per dollar of investment |
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Return of Sales |
Net Income ------------------- Sales |
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ASSET TURNOVER |
-Ameasure of company efficiency |
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Asset Turnover |
Sales --------------- Total assets |
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RETURN ON EQUITY |
-Ameasure of the amount of profit earned per dollar of investment |
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Return Equity |
Net Income --------------------- Stockholders |
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PRICE-EARNINGSRATIO |
-A measureof growth potential, earning stability, & management capabilities |
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Ratio |
Market value of shares ------------------------------------ Net Income |
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MARKET VALUE OF SHARES |
-How much wouldit cost to purchase all shares of a company |
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Balance sheets |
-Natural Increases -Long-termplanning -Financingchoices |
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Income statement |
-Some itemstied to sales -depreciationexpense tied to level of long-term assets -Interestexpenses tired to the level of interest-bearing debt -Income taxexpense tied to pretax income |
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NUMBER OF DAYS SALE & INVENTORY |
-From Purchase of raw material to selling of finished goods |
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AVERAGE COLLECTIONPERIOD |
-From sale of finishedgoods to collection of cash |
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OPERATING CYCLE |
-From purchase of rawmaterials to collection of cash |
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Short-Term Financial Management |
1) Cash management 2) Receivables management 3) Inventory management 4) Obtaining short-term financing 5) Internal controls |
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Cash Management |
-Most billsbe paid in cash -Continuouscash management requires computers, staff, and forecasting -A cash shortfallis inconvenient and potentially costly -Cash is lowyield |
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Cash Budget |
-Carefulplanning -Proddingcredit customers -Stretching payments to suppliers |
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LINEOF CREDIT |
-Pre-approvedshort-term loan |
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SHORT-TERMINVESTMENTS |
-Cashequivalents money market funds |
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Receivables management |
Why allowany customers to buy on credit? (Marketing) Increased salesWhy notextend credit to everyone? Bad debts Bookkeeping costs Implicit interest cost |
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CreditPolicy Variables |
CreditStandards Credit Period Penalty/discount Collectionpractices |
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)Short-term bank loan |
Line ofcredit Commercial paper – (IOU) 0.06% |
