Chapter 3 Essentials Flashcards
Chapter 3 focuses on the what?
Financial Statements
The balance sheets includes all three items in the fundamental relationship
Assets, Liabiltiies, and Common Equity
Current Assets
Cash + Marketable Securities + AR + Inventory + Prepaid Expenses + Other Current Assets
Total Assets
Current Assets + Long Term Assets + Goodwill + Other Assets
Current Liabilities
AP + Notes Payable + Current Portion of Long-Term Debt + Other Current Liabilities
Total Liabilities
Current Liabilities + Long-term Liabilities + Deferred Income Tax + Other Long-Term Liabilities
Common Equity
Common Stock + Retained Earnings
Profit
Revenue - Costs and Expenses
Cost of Sales
Beg. Inventory + Cost of Purchases - End Inventory
Gross Profit
Revenue - Cost of Sales
EBIT
Gross Profit - Operating Expenses
EBITDA
EBIT + Depreciation & Amortization
Net Earnings
Earnings before Income Taxes - Incomes Taxes
Net Earning available to Common Shareholders
Net Earnings - Preferred Dividends
Sources and Uses Statement
Compares changes in balance sheet items
Sources of Cash
Increases in liabilities, increases in equity, decreases in assets,
Use of Cash
Decrease in liabilities, decrease in equity, increase in assets
Cash Flow Statement
Actual cash inflows and outflows of cash related to operating investing, and financing activities
Cash Flows from Operating Activities
Net Earnings + Noncash Items +/- Changes in Operating Assets and Liabilities
Cash Flows from Investing Activities
- Capital Expenditures + Proceeds from Sale of Property/Equip/Businesses - Payments for Businesses Acquired
Cash Flows from Financing Activities
+/- Proceeds from Repayments of Long-Term Borrowing, Proceeds from Repurchase of Common Stock - Cash Dividends +/- other Financing Activities
Cash at End of Year
Change in Cash +/- Effect of Exchange Rate + Cash at Beg of Year
Balance Sheet
Helps you know what the firm owns and what the firm owes
Income Statements
Helps you know how much revenue was generated, what costs and expenses were incurred, and how profitable the firm was
Cash Flow Statements
Helps identify the extent to which cash was generated from operating activities, how much cash was invested, and how much cash was used to finance the activities with which the firm was involved
