Corporate finance basics Flashcards
What are the 4 major corporate-finance tasks?
- Profitability levers i.e. prices, volumes, etc.
- Budgeting and planning i.e. quarterly forecasts, annual budgets, etc; developing the firm’s strategic vision; and optimize resource allocation to achieve goals
- Reporting i.e. generate standard financial reports.
- Variance analysis i.e. providing specific financial information to decision-makers.
What is project selection?
What are the 4 key financial statements?
- Income statements (SPL)
- Balance Sheet (SFP)
- Statement of Stockholder’s Equity
- Statement of Cashflows
What periods are usually shown in SPL?
A quarter or a year.
What periods are usually shown in SFP?
It is not a period but a moment; usually the end of the year.
What does the statement of cashflows show?
Cash inflows/outflows from operations, investing and financing.
Visualize a simple statement of stockholder’s equity.
Enumerate the 8 phases of the accounting cycle.
What steps in the accounting cycle are expedited by technology?
- Identifying transactions
- Recording Journal entries
- Posting Ledger entries
- Unadjusting trial balances
What does the adjusting process phase of the accounting cycle entail?
Identifying Accruals and Prepayments.
What is the first step in preparing a Cashflow statement?
Establish net income
What is the second step in preparing a Cashflow statement?
Adjust for non-cash expense items.
What is the third step in preparing a Cashflow statement?
Adjust for changes in operating assets e.g. accounts receivable.
What is the fourth step in preparing a Cashflow statement?
Adjust for changes in operating liabilities e.g. accounts payable.
Visualize a completed Statement of Chash Flow
