Fourth Quarter Overview Flashcards
Income Statement
A financial statement showing the revenue and expenses for a fiscal period.
Balance Sheet
A financial statement that reports assets, liabilities, and owner’s equity on a specific date.
Operating Cash Flow
- Cash generated from a firm’s normal business activities
- Inbound: Money made from sales
- Outbound: Money spent on supplies/utilities
Investing Cash Flow
- Inbound: money spent on equipment
- Outbound: Money made from return of investment
Financing Cash Flow
- Inbound: what you are earning
- Outbound: what is spent
Net Sale Equation
Sales - Sales Discounts - Sales Returns and Allowances
Gross Profit Equation
net sales - cost of goods sold
Current Assets
Items that can or will be converted into cash within one year
Fixed Assets
Assets that are relatively permanent, such as land, buildings, and equipment
Current Liabilities
Liabilities due within a short time, usually within a year
Long-Term Liabilites
Liabilities owed for more than a year
(Ex. mortgage)
Cash Flow Statement
A financial statement that shows the flow of money in and out of the business’ operating, investing, and financing activities
Ratio Analysis Equation
Current Ratio = Current Assets / Current Liabilities
Break-Even Analysis
The process of determining the number of units a firm must sell to cover all costs
EBITDA Meaning
Earnings before income tax and depreciation
Accounts Receivable
Money owed to the business (asset)
Accounts Payable
Money owed by the business (liability)
Working Capital
current assets - current liabilities
Different Ways to Value a Business (Tangible)
-Replacement
-Earnings
-Market
-Liquidation
Different Ways to Value a Business (Intangible)
-Goodwill
-Patent
-Copyright
-Trademarks
Intangible Assets
Assets that do not have physical substance
Tangible Assets
- Physical Assets
- Physical things, such as automobiles, clothing, land, or buildings
Different Fund Sources
-Loans
-Angel investors
-Friends/family
-Grants
SBA Loan
A loan granted by the Small Business Administration that can be used to start/finance a business
SBA 7(a) Loan
-Up to $5 million
-simple application process
-eligibility for profit
-small business
-business must be based and operating in the USA
-must need loan
-must use it for a sound business purpose
-can not be delinquent on USA obligations
-credit worthy
SBA 504 Loan
-For profit
-worth less than $15 million
-net income = less than $5 million after taxes (2 years prior to application)
-up $5 million
-only used for fixed assets
-varies based on SBA guidelines
SBA Microloan
-Up to $50k
-Every lender makes their own decision
W2
A form filled out by the employer at the end of each tax year for the employee and is a statement of income and withholdings for that tax year
W4
A form filled out by the employee when the employee accepts a new job or at any time after that when the employee wants to change filing status or withholding allowances
Ways to Harvest a Business
-Distribute cash flows
-Go public and offer stock
-Use a private equity recapitalization
-Sell the firm
Gross Pay
Pay before deductions
Net Pay
take-home pay after deductions
Overtime
Time worked beyond the regular hours (1.5x normal rate)
