Chap2 Equations Flashcards
Assets
Assets = Liabilities + shareholders’ equity
balance sheet identity equation
Income
Revenues - Expenses = Income
income statement equation
Cash flow from assets
CFa = CFc + CFs
where
CFa = OCF - Net capital spending - Change in net working capital
Net capital spending
NCS = Ending NFA - BegNFA + dep
Operating Cash Flow
OCF = Earnings before interest and taxes (EBIT) + dep - taxes
change in net working capital
Change in NWC = EndNWC - BegNWC
Cash flow to creditors
CFc = interest paid - net new borrowing
OR
CFc = CFa - CFs
Cash flow to stockholder
CFs = Div pd - Net new equity
Or
CFs = CFa - CFc
Net Income
Net income = Dividends + Addition to retained earnings
Or
=EBT-EBT x tax rate = net income
EBT
Net Income/(1-tax rate)
EBIT
EBT + interest
EBIT
sales - costs - dep
Common stock
total assets - total liabilities - accumulated RE
net new equity
TAend -TAbg
book value
net fixed assets + current assets
