Quiz 2 Flashcards
What Is a Balance Sheet?
In short, the balance sheet is a financial statement that provides a snapshot of what a company owns and owes, as well as the amount invested by shareholders.
(Assets=Liabilities+Shareholders’ Equity)
What are the components of a Balance Sheet?
- Assets - Cash and equivalent, short-term securities, accounts receivable, Inventory, etc.
- Liabilities - Accounts payable, accrued expenses, deferred revenue, etc.
- Shareholder Equity (Assets minus liabilities) - represents the net value/net worth
What is Cash Flow?
Cash flow is the amount of cash that comes in and goes out of a company.
What are the components of a Cash Flow Statement?
- Financial statement - provides aggregate data on all cash flows
- Cash received - from business activities
- Cash outflows - pay for business activities
What are the types of Cash Flow?
- Operational - cash received or spent from business activities
- Investment - cash received or spent through investments
- Financing - cash received or spent through debt or debt repayments
What is Free Cash Flow?
FCF is the cash generated by a company from its normal business operations after subtracting any money spent on capital expenditures (CapEx).
What does a Financial Statement provides?
It provides aggregate data on all cash flows
What is Income Statement and how it differs from Balanced Sheets?
While a balance sheet provides the snapshot of a company’s financials as of a particular date, the income statement reports income through a specific period, usually a quarter or a year, and its heading indicates the duration, which may read as “For the (fiscal) year/quarter ended June 30, 2021.”
Define Operating and Non-Operating Statements.
- Operating - Revenues and expenses related to regular business activities.
- Non-Operating - Any revenues and expenses not related to regular business operations (sale of investment, etc.)
How to calculate the Net Income?
Net Income = (Total Revenue + Gains) – (Total Expenses + Losses)
How to calculate the Cost of Goods Sold?
COGS = Beginning Inventory + P − Ending Inventory
(P=Purchases during the period)
What is Break Even Point?
The point where total cost and total revenue are EQUAL
How to calculate the Break Even Quantity?
Break even quantity =
Fixed costs / (Sale price per unit – Variable cost per unit)
What Is Cost of Goods Sold (COGS)?
Cost of goods sold (COGS) refers to the direct costs of producing the goods sold by a company.
What are the 4 financial statements included in formal financial statements?
- Income Statement – Shows profits and losses over a period of time
- Cash Flow – Shows cash coming in and out of the business
- Balance Sheet – Shows what the company owns and owes
- Statement of Capital – Changes in Equity
