Finance Chapter 2

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Name the 5 types for Financial Statements.
- Balance Sheet
- Statement of Comprehensive Income (inclds Income Statement)
- Statement of Cash Flows
- Statement of Changes in Equity
- Notes including Accounting Principles
The Balance Sheet is a snapshot in time of the firm's financial position. The formula used for the balance sheet is:
Assets = Liabilities + Shareholders Equity
Describe what Assets, Liabilities & Shareholders Equity are.
- Assets:
- How a firm uses their capital
- What the company owns
- Liabilities:
- What the company owes
- Shareholders Equity:
- The difference between the value of the firms assets and liabilities
What is a current asset?

Cash or could be converted into cash within one year.
What is a current liability?

Due to be paid within the next year.
What is the purpose of an Income Statement?
- Income statements are used to list a firms revenues and expenses over a period of time.
- Net income or earnings is the "bottom" line of the income statement.
Name 3 ways to analyze the Balance Sheet.
- Liquidation Value:
- Value of the firm is all assets were sold and liabilities paid
- Debt-Equity Ratio:
- Measures a firms leverage
- Enterprise Value:
- Enterprise Value = Market value of Equity + Debt - Cash
- Current Ratio:
- Current Assets / Current Liabilities
- Quick Ratio:
- (Current Assets - Inventories) / Current Liabilities
Name 3 ways to analyze the Income Statement.
- Gross Margin:
- Gross Profit / Sales
- Operating Margin:
- Operating Income / Sales
- Net Profit Margin:
- Net Income / Total Sales
- Asset Turnover:
- Total Sales / Total Assets
- Accounts Receivable Days:
- Accounts Receivable / Average Daily Sales
- Return on Equity:
- Net Income / Book Value of Equity
What are the 3 sections on a Statement of Cash Flows?
- Operating Activity
- Investment Activity
- Financing Activity

Author

Chas

337758

Card Set

Finance Chapter 2

Description

Finance Chapter 2

Updated

2018-02-02T16:57:54Z

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