Ch 2 Flashcards
Net working capital
Current assets - current liabilities
Balance sheet
Financial statement showing firm’s accounting
Value on a particular day
Tangible assets
Property, plant, equipment
Intangible assets
Patents, copyrights
Liquidity, 2 dimensions?
1 Speed and ease with which an asset can be converted to cash
2 Loss of value occurs with quickly sold illiquid assets
Financial leverage
Use of debt in firm’s capital structure
Shareholder’s equity
SE = assets - liabilities
Generally Accepted Accounting Principles (GAAP)
Common set of standards and procedures by which
Audited financial statements are prepared
Income statement
Financial statement summarizing a firms performance
Over a period of time
Income
Income = revenues - expenses
Earnings per share? Dividends per share?
Earnings per share = net income/total shares outstanding
Dividends/share = total dividends/total shares outstanding
Non cash items
Expenses charged against revenues that don’t
Directly affect cash flow, such as depreciation
Product costs, how are they reported on income statement?
Costs include raw materials, direct labor expense and manufacturing overhead
Reported on income statement as cost of goods sold
Period costs
Incurred in particular time period, reported as selling,
General and administrative expenses
Average tax rate
Total taxes paid/total taxable income
