Intro to Financial Statements Analysis Flashcards
Balance sheet
lists the firm’s assets and liabilities providing a snapshot of the firm’s financial position at a given point of time
Assets
list the cash, inventory, PP&E and other investments the company has made. Assets show how the firm uses its capital
Assets = liabilities + stockholders equity
Current assets
cash or assets that could be converted into cash within a year
Accounts receivable
amounts owed to a firm by customers who have purchased goods or services on credit. Listed as an asset
Inventory
raw materials as well as work in progress and finished goods
Long term assets
Includes real estate or machinery that produce tangible benefits for more than a year
Accumulated depreciation
total amount deducted over the life of an asset
Book value
acquisition cost – accumulated depreciation
Goodwill
miscellaneous category (long term asset) for intangible assets that are harder to parse out individually or measured directly (i.e. customer loyalty, brand reputation)
Intangible assets
Long term assets that are non-physical, but identifiable (i.e. computer software, copyrights, patents, licensing agreements, website domain names)
Liabilities
show the firm’s obligations to creditors. debt
Current liabilities
satisfied within one year
Accounts payable
amounts owed to suppliers for products and services purchased with credit. Listed as a liability
Capital leases
long term lease contracts that obligate the firm to make regular payments in exchange for the use of an asset
Net working capital
difference between current assets and current liabilities. It’s the capital available in the short term to run a business
Stockholder’s equity
difference between the firm’s assets and liabilities. Accounting measure of the firm’s net worth. Also called the book value of equity
Market capitilization
also called the market value of equity. It is the total dollar market value of a company’s outstanding shares of stock.
MC = current stock price x # of outstanding stock shares
Enterprise value
also called the total enterprise value (TEV) is the value of the underlying business assets free of debt and separate from cash and marketable securities
. EV = MC + debt - cash
Income statement
lists the firm’s revenues and expenses over a period of time. It shows the flow of revenues and expenses generated by the assets and liabilities on the BS
Net income
also called the firm’s earnings, measure of a firm’s profitability during the period. It’s the total earnings of the firm’s equity holders. It does not correspond to cash earned
Stock options
the right to buy a certain number of shares by a specific date at a specific price
Operating expenses
(SG&A). include depreciation and amortization (not an actual cash expense)
EBIT
income after adjusting for other sources of income or expense (i.e. a firm’s financial investments and other activities that are not the central part of a company’s business)
Convertible bonds
a form of debt that is converted into shares
Statement of cash flows
utilizes the info from the IS and BS to determine how much cash the firm has generated, and how that cash has been allocated during a set period
Capital expenditures
Capex. purchases of new PP&E
Retained earnings
net income - dividends
Operating income
gross profit - operating expenses
Gross profit
revenue - COGS
Gross margin
reflects a firm’s ability to sell a product for more than the cost of producing it
Operating margin
reveals how much a company earns before interest and taxes from each dollar of sales
Net profit margin
shows the fraction of each dollar in revenues that is available to equity holders after the firm pays interest and taxes
Current ratio
used to assess whether a firm has sufficient working capital to meet short term needs
= current assets/current liabilities
Leverage
extent to which a firm relies on debt as a source of financing
Price-earnings ratio (P/E)
the value of equity to the firm’s earnings. Measures whether a stock is over or under valued (based on the idea that stock should be proportional to the level of earnings it can generate for its shareholders)
