Financial Statements, Taxes and Cash Flow Flashcards
1
Q
Explain Financial leverage
A
The use of debt in a firm’s capital structure
2
Q
Differentiate between Book and Market Value
A
Book value show the cost of an asset while Market value is the value of the asset today
typically in regard to shares
2
Q
State the income statement equation
A
Revenues - Expenses = Income
3
Q
Describe Cash Flow Identity
A
Cash flow identity says that cash flow from a firm’s assets is equal to cash flow paid to supplliers of capital
Cash flow from assets = Cash flow to creditors + Cash flow to stockholders
4
Q
Differentiate between Marginal and Average Tax rate
A
Marginal tax rate is the amount of tax payable on the next dollar earned while Average tax rate is the total tax paid divided by the total taxable income.
