Fin. Statement, Cashflow &taxes

Question 1

Statement of Fin. Position?

Answer 1

Means of organizing and summarizing what a firm owns(assets), what a firm owes(liabilities) and the diff. bet. the two(the firm’s equity)

Question 2

Statement of Fin. Position is also called ?

Answer 2

Balance Sheet

Question 3

In 2011, publicly traded firms in Canada switched to?

Answer 3

international financial reporting standards (IFRS).
Under IFRS, a company enjoys flexibility over how to present its statement of financial position.

Question 4

Types of assets

Answer 4

Current: 1 yr/less than 12 month
Fixed: tangible & intangible

Question 5

bond and bondholders generically refer to

Answer 5

long-term debt and long-term creditors

Question 6

Shareholder/Owner/ Common Equity

Answer 6

the difference between the total value of the assets (current and fixed) and the total
value of the liabilities (current and long term)

Question 7

SFP Equation

Answer 7

Assets = Liabilities + SE

Question 8

Net Working Capital

Answer 8

Current Asset - Current Liab.

Question 9

Important things to examine when dealing with SFP

Answer 9

-Liquidity: ease with which an asset can be converted into cash.
-Debt vs equity: Equity
holders are entitled to only the residual value SE= A-L
-Market value vs book value:
MV is the price at which willing buyers and sellers trade the assets WHILE BV/ carrying amt is the accounting value of a firm’s assets

Question 10

Two dimensions of Liquidity

Answer 10

Easer of Conversion
Loss of Value ( An illiquid asset is one that cannot be quickly converted to cash without a
substantial price reduction.)

Question 11

Assets are listed inorder of decreasing liquidity list them

Answer 11

CA: cash, AR, inventory(least liquid) , FA

Question 12

The more liquid a business is ?

Answer 12

the less likely it is to experience financial distress

Question 13

Financial Leverage ?

Answer 13

The use of debt in a firm’s capital structure. Financial leverage
increases the potential reward to shareholders, but it also increases the potential for financial distress and
business failure.

Question 14

Statement of Comprehensive Income

Answer 14

measures performance over some period of time, usually a year. REV-EXP = Inc.

Question 15

How to explain SFP&SCI

Answer 15

If you think of the statement of financial position as a snapshot, then you can think of the statement of
comprehensive income as a video recording covering the period between, before, and after.

Question 16

Net Income is also called ?

Answer 16

Bottom Line and its often expressed per share basis (earnings per share)

Question 17

why is accountig income different from cash flow

Answer 17

a statement of comprehensive
income contains non-cash items. The most important of these is depreciation.

Question 18

Cash Flow from assets

Answer 18

operating cash flow, capital spending, and additions to
net working capital.

Question 19

what is the cash flow identity
?

Answer 19

It says that the cash flow from the firm’s assets is equal to the cash flow paid
to suppliers of capital to the firm.

Question 20

Individual tax rate

Answer 20

apply to income from employment & from unincorporated businesses

Question 21

Diff. between Average and Marginal Tax rate

Answer 21

Average: tax bill divided by your taxable income; i.e the percentage of your income that goes to pay taxes. Your marginal tax rate is the extra tax you would pay if you earned one more dollar.

Question 22

the larger CCA rates ?

Answer 22

reduces taxes and increase cash flows.