Module 2: Long-Term Funding, Investing, & Taxes Flashcards
Define “Capital Expenditures (CapEx)”.
Funds that are used by a company to acquire, upgrade, and maintain physical assets. E.g. property, plants, buildings, technology, and equipment.
Define “Property, Plants & Equipment (PP&E)”.
A section on the Balance Sheet that represents a company’s physical or tangible long-term assets.
Define “Interest Expense”.
A non-operating expense that is shown on the Income Statement. It represents interest payable on any borrowings. E.g. bonds, loans, convertible debt, or lines of credit.
Define “Common Stock (Capital Stock)”.
The standard ownership share of a corporation.
Define “Dividends”.
Optional cash payments that are made to each common shareholder., Usually linked to net income, the share price, or a per-share figure.
Define “Stock Repurchases”.
When the company offers to buy back shares from existing investors at an agreed-upon price.
Define “Preferred Stock”.
Stock that entitles the holder to a “preferred dividend (fixed dividend)”, whose payment takes priority over that of ordinary share dividends. Note, that it is much closer to debt rather than equity, and preferred dividends are listed on the Income Statement.
Define “Finance Leases (Capital Leases)”.
A contract entitling a “lessee (renter)” to the temporary use of an asset, and which has the economic characteristics of asset ownership for accounting purposes. Additionally, they usually have an “Ownership Transfer Option”.
Define “Operating Leases”.
A contract that allows for the use of an asset, but does not convey ownership rights of said asset. Treated differently under U.S. GAAP.
Define “Book Statements”.
The statements that you see when you are looking at public, annual & quarterly announcements.
Define “Tax Statements”.
The statements that a company files with it’s government when it pays taxes.
Define “Net Operating Losses (NOLs)”.
When a company loses money over a given time period.
Define “Deferred Tax Assets (DTAs)”.
An item on a company’s Balance Sheet that reduces a company’s taxable income in the future.
Define “Deferred Tax Liabilities (DTLs)”.
A listing on a company’s Balance Sheet that records taxes that are owed, but are not due to be paid until a future date.
Explain “Gains/Losses” on Asset Sales”.
These occur when a company purchases an asset and then decides to sell it at a later time, either at a higher or lower price than it previously paid.
Define “Write-Downs”.
The reduction in the book value of an asset when its fair market value has fallen below it’s book value, and thus becomes an “impaired asset”.
Define “Impaired Asset”.
An asset that has a market value that is less than the value listed on the company’s Balance Sheet.
Define “Stock-Based Compensation (SBC)”.
When companies supplement employees’ cash compensation with some form of equity.
Define “Other Intangible Assets (OTAs)”.
An asset that is not physical in nature. E.g Goodwill, brand recognition, and intellectual property. OTAs are amortized over time.
Define “Goodwill”.
The portion of the purchase price that is higher than the sum of the net fair value of all the assets purchased in an acquisition and the liabilities assumed in the process. Rather than amortize Goodwill, it is checked each year for “impairment”.
