Finance Chapter Two

• Financial statement showing a firm's accounting value on a particular date.
• Shows assets, liabilities, and difference which is equity.
• Assets = Liabilities + Owner's Equity.

• One that has a relatively long life.
• Tangible or Intangible.

• Assets that last less than one year.
• Cash.
• Accounts recievable.

• debts that are to be paid off within the year.
• Accounts payable.

• Debt to be paid after a current year, longer loan time.
• Bonds.

If business were liquidated, residual value to shareholders.

Current assets less current liabilities.

The speed and ease with which an asset can be converted into cash without a significant loss in value.

• Increases potential reward to shareholders, but also increases potential financial distress and business failure.
• Debt as a portion of asset.

The common set of standards and procedures by which audited financial statements are prepared.

A different value requirining a different balance sheet than market value.

• Measures performance over some period of time, usually a quarter of a year.
• Revenues - Expenses = Income

Net Income / Total Shares Outstanding

Total Dividends / Total Shares Outstanding

Expenses chanrged against revenues that do not directly affect cash flow, such as depreciation.

Total Taxes Paid / Taxable Income

Amount of tax payable on the next dollar earned.

(Rate One x 50,000) + (Rate Two x 25,000) + (Rate Three x 25,000) Until Amount is Reached.

• The total Cash Flow to creditors an cash flow to stockholders, consisting of the following:
• Operating Cash Flow - Capital Spending - Change in Net Working Capital

• Cash generated from a firm's normal business activities.
• Earnings (before interest and taxes) + Depreciation - Taxes

Ending Net Fixed Assets - Beginning Net Fixed Assets + Depreciation

Ending NWC - Beginning NWC

Dividends paid out by a firm less net new equity raised.

Dividends Paid - Net New Equity Raised