Ch 2 FS, CF, Taxes Flashcards
2 types of fixed assets
tangible fixed assets
intangible fixed assets
what are fixed assets
long term assets
intangible long term assets
trademarks or patents
synonym for fixed assets
capital assets
long term liability
opposite of current liability
Why does A-L=SE
If all the liabilities were paid off, whatever remains in the fir is shareholders equity!!!!
what is net working capital
current assets- current liabilities
what are the two dimensions of liquidity
ease of conversion vs loss of value
HIGHLY LIQUID ASSETS: sold fast w low loss of assets
ILLIQUID ASSETS: sold fast w lots of loss of asset value
ANYTHING can be liquid when if you cut the price fast enough
is it more profitable to hold liquid assets or illiquid assets
illiquid assets: cuz they generate some value
highly liquid assets like cash dont generate revenue
what is financial leverage
the use of debt in a firms capital structure (makeup)
what requires more frequent revaluations?
ppe who’s value is subject to change and is unpredicatable
what is market value
price which buyers/sellers trade the assets
if market value ««< book value
««<= relallly reallllly below
then you have to do write downs
does canadain gaap or ifrs perment reversal of impairment losses (upward revaluations)
IFRS
Earnings per share memaning
net income expressed on a per-share basis
net income/shares
what is matching principle
revenues should be related to expenses
why do we care about the socf
because it adds back non cash expenses!!
accounting is not the same as cash flow!
what is the cash flow identity
-derived from
-formula
a=l+se
cash from assets= cash to liabilities (bond holders)+ cash to shareholders
Cash flow from assets components
+ formula
operating cf: cf from daily operations
capital spending: net spending on FIXED ASSETS( long term) [purchases of fixed-sales of fixed]
additions to net working capital: change in nwc
OPERATING CF- NET CAPITAL SPENDING- CHANGES IN NWC
Formula for operating cash flow
EBIT+Depreciation - Taxes
Accounting defition of operating cash flow vs finance def of operating cash flow
acct: net income+ depreciaiton
->interest is deducted in calculations
fnce: ebit+depreciation-taxes
->interest not deducted
Capital spending formula
ending fixed assets -beginning fixed assets+ depereciation