Financial-Balance Sheet Part 2

Question 1

Definition of Capex

Answer 1

Capital expenditures are the capital purchases that are carried on the balance sheet and depreciated over time.

Question 2

Definition of Fixed Assets

Answer 2

Fixed Assets are defined by SLB as items:

• That cost over $5,000,
• Have a useful life greater than 2 years
• Have a serial number

All three of these criteria must be met in order to capitalize

Question 3

How often fixed assets count are done?

Answer 3

Once every 2 years.

Question 4

What does GBV stand for and what is equal to?

Answer 4

Gross Book Value = Acquisition price (original purchase price)

Question 5

What does NBV stand for and what is equal to?

Answer 5

Net Book Value = GBV - Accumulated depreciation (sum of depreciation to date)

This is the current value of a fixed asset.

Question 6

What is Gross Asset Turns?

Answer 6

Gross Asset Turns = Net Revenue/GBV (Relates to Asset Replacement Value; when it is time to dispose of unused assets)

Question 7

What is Net Asset turns?

Answer 7

Net Asset turns = Net Revenue/NBV

Relates to improving ROI; help us to understand asset utilization efficiency

Question 8

What is ageing?

Answer 8

Ageing = NBV/GBV

Indication of age of fleet. (Low ration would suggest that we are not investing in new technology)

Question 9

What is Liquidity?

Answer 9

This is how fast an asset can be converted into cash

Liquidity = Net income + depreciation - capex + delta (short term assets and liabilities).

Question 10

What is Cash Flow? What are their categories?

Answer 10

It is the way company decides how to spend the money (3 categories)

Operating Activities: Directly related to the operation of the business.

Investing Activities: Relates to items like the buying/selling of assets.

Financial Activities: Relates to items such as buying/selling stocks.

Question 11

Difference between Profit and Cash

Answer 11

Profit is the revenue that company has earned, but cash is not collected. (Like end of the months tickets)

Cash is the money that the company physically has in the bank.

Question 12

How can we improve Liquidity?

Answer 12

Increasing revenue and reducing costs.

Decreasing receivables making sure we get the cash faster, revenue cycle as fast as we can.

Increase payable with vendors/suppliers, lengthen payment terms. This will ensure more cash on hand.