Lecture 3.1 Flashcards
an arrangement in which the utilization or operation of an asset is delegated
agency
is making decisions that impact money spent or earned by a firm
Financial Management
Deciding to invest a firm’s capital in long-term projects/assets
Financial Management
Deciding to invest a firm’s capital in long-term project/assets
Capital Budgeting
the form or the investments in the firm by its investors (debt or equity
Capital Structure
Deciding on the uses and sources of short-term money
Working Capital management
snapshot of what a firm owns or owes in a specific point of time
balance sheet
a recording of performance over a period
Income statement
anything that is expected to generate a cash inflow in the future
Asset
Anything that is expected to generate a cash outflow in the future
Liability
The difference between the value of the assets and liabilities
Equity
monies owed to our firm for credit sales we have made
Accounts receivable
Goods owned by the firm specifically for the purpose of resale
Inventory
real assets
PPE
stocks bonds, mortgages, loans
Financial Assets
the speed and ease with which an asset can be converted to cas
liquidity
monies owed to a supplier or vendor for products we purchased on credit
Accounts Payable
financial obligations due within the year
Current Liabilities
financial obligations due in more than one year
Long-term debt
cash paid in by the owners of the firm
commonstock
cumulative account profits earned by a firm but not paid to owners as dividends
retained earnings
the book value of a firm’s equity is negative
technical default
the market value of equity can never be less than zero
limited liability
material costs, labor/wages
cost of goods sold
advertising expenses office secretarial expenses, managerial salary
overhead
earnings before interest taxes depreciation and amortization
EBITDA
an income statement expense that does NOT represent a cash flow
Non-cash item
an approach to calculating deprecation that combines straight-line deprecation and double declining balance methods
Modified Accelerated Cost Recovery System (MACRS)
the historical cost of an asset less accumulated depreciation
net fixed assets
the sum of all previous depreciation expens
accumulated depreciation
the accounting value of an asset
book value
a firm’s shares of common stock that are available for purchase from the stock market
Shares outstanding
cash payment to our shareholders/owners
dividend
selling a fixed asset at its current market value
salvage
