Exam 1 Flashcards
The primary role of finance within businesses
is to plan for, acquire, and utilize resources to maximize the efficiency and value of the organization
The Four C’s
Cost minimization
Cash sufficiency
Capital access
Control
After tax income
AT = BT x (1-T)
After tax interest rate
AT= BT x (1-T)
Before Tax Percentage
BT%= interest rate/(1-T)
Net income (profit) =
Revenues - Expenses
net income
Net income measures the overall (total) economic profitability as defined by GAAP.
In not-for-profit businesses, net income typically is called:
Revenues over expenses
Excess of revenues over expenses
Change in net assets
cash flow (CF) can be approximated by:
CF = Net income + Noncash expenses
= Net income + Depreciation
statement of changes in equity
reconciles the income statement net income item with the balance sheet equity account
total (profit) margin
=net income/total revenue
the basic accounting equation
Assets = Liabilities + Equity.
Equity =
Assets – Liabilities
NWC =
Current assets - Current liabilities
Equity
= Total assets - Total liabilities
Debt ratio
total debt/total assets
Profit Margin
Net income / Total Revenue = profit margin
Before Tax Profit Margin
Operating Income / Total Revene = Before Tax Profit margin
Total Expenses
Total Revenue - Net Income= Total Expenses
