Financial Statement and Cash Flow_CH2 Flashcards
states what the firm owns and how it is financed.
Balance Sheet
what the stockholders would
have remaining after the firm discharged its obligations.
equity
listing of assets in BC
The assets in the balance sheet are listed in order by the length of time it normally
would take an ongoing firm to convert them into cash
marketable securities
financial asssets that can be easily sold and brought. bons stocks, mutual funds,. they are as short term investment
Cash VS
market securities
credit sales VS
cash sales
make comodity VS
buy commodity
lease VS
purchase
listing of liabilities and stockholders’ equity
The liabilities and the stockholders’ equity are listed in the order in
which they would typically be paid over time
debt VS
equity
liquidity
the ease and quickness with which assets can be converted to cash
current assets
the most liquid and include cash and assets
that will be turned into cash within a year from the date of the balance sheet
Accounts
receivable
amounts not yet collected from customers for goods or services sold to them
(after adjustment for potential bad debts).
inventory
raw materials to be
used in production, work in process, and finished goods
Fixed assets
the least liquid kind of assets
[Tangible fixed assets include property, plant, and equipment]
Intangible assets
no physical existence but can
be very valuable
[trademarks, patents]
more liquide better for short-term obligations
current assets like cash, accounts receivables or short-term bonds and stocks
GAAP
Gennerally Accapted Accounting Principle
Does Cah flow appera on Income Statement
no
noncash items
expenses against revenues but do not affect cash flow
examples of noncash items
depreciation
deferred tax
deferred tax
The current tax portion is actually sent to the
tax authorities (for example, the Internal Revenue Service). The deferred tax portion is not
theory is that if taxable income is less than accounting income in the current
year, it will…
it will be more than accounting income later on
