Week 3: General Financial Statements Flashcards
Cash and cash equivalents
Assets that can be liquidated within 3 months
Receivables
When someone owes you something
Inventory
Merchandise that you are in the business of selling
Prepaid expense
Pay for something in advance, like rent. Becomes an asset when you buy it. Expires over time as it is used up
Current Assets vs Long Term Assets
Current assets you can turn into cash within the year
Long term assets take more than a year to turn into cash
Tangible
What you can see
Intangible
What you can not see
Goodwill definition
What a company pays for another company over its fair value
Right of use asset
Someone leased out the asset
Three types of investments by one company into another
0-20% investment - use the fair value method
20-50% Associate - use the equity method (every year you add your share of the subsidiary’s profit to your balance sheet, and reduce it when it makes a dividend)
50%+ Consolidated: financial statement is combined with the subsidiary as if it were one company
Content Assets
Media assets (like rights to movies and tv shows)
Straight-line vs declining balance
Assets like equipment and buildings need to be depreciated, meaning the value needs to be reduced
Straight-line means you subtract the same amount each year
Declining balance depreciated the same amount a year. Logarithmic
Current liabilities vs long-term liabilities
Current liabilities have to be paid within the year
Long-term liabilities have to be paid after the year
Accrued expenses
Not expenses, actually a liability
a past expense that has not been paid for yet
Deferred revenue
Liability
When you are paid in advance for a service you have not yet provided
