Chapter 1 Flashcards
What are the requirements all firms must report
Cash flow for the period, earnings for the period, comprehensive income for the period, Investments and distributions to owners for the period.
What is a balance sheet
Also known as a statement of financial position, shows firms assets, liabilities, and owners equity at a point in time
What are assets
Liabilities + Owners Equity
Financial position displayed for more than one year is called a
A comparative balance sheet
What fulfills the requirement that a firm disclose its earnings for a period
Income statement aka statement of earnings, or profit and floss statement
What makes up net income
the difference between the firms revenues and all expense including taxes
What are some common non cash expenses
depreciation and amortization
What cash outlays are Not recorded as expenses
purchases of inventory, property, plant or equipment
Operating income
income after expenses but before inclusion of income from investments and before interest or taxes have been deducted
Earning before interest and taxes (EBIT)
Firms total income before interest or taxes have been deducted
Earning before tax
The firms EBIT less interest charges
What fulfills the requirement that a company publicize all investments in the firm and distribution to owners
Statement of owners equity or statement of stockholders equity
What is treasury stock
outstanding shares which have been purchased but not yet retired
What is included in a statement of retained earnings
changes in firms retained earnings those not distributed as dividends
what does an operating performance ratio measure
a firms profitability and asset usage skill
What measures a firms ability to meet short term financial obligations and skill managing working capital?
Liquidity ratio
Financial strength ratio measures
the risk associated with the way a company has packaged debt and equity to finance assets
What is profit margin?
The net income divided by net sales
What is a gross margin?
average percent in which sales exceeds the cost of goods and services
What is asset turnover?
Net sales divided by average total assets for the year
Return on Assets or ROI
(Net income / Net sales) x (Net sales / Average total assets)
Return on Equity
Net income available to shareholders divided by the average owners equity
Earnings per share
Net income divided by the average number of shares
Can EPS be compared between companies?
No as they may have different numbers of shares outstanding
Price earnings ratio
Stock price / EPS
Price Earnings ratio
Indicates a stock markets opinion of a company’s prospective for growth and earnings
