Balance Sheet
This financial statement shows what a company owns, owes, and what remains for owners at a specific point in time.
What is the Balance Sheet?
Explanation: The balance sheet reports assets, liabilities, and stockholders' equity.
This describes how quickly an asset can be turned into cash without losing much value.
What is liquidity?
Explanation: Liquidity measures how easily an asset can be converted to cash.
Revenue minus expenses equals this.
What is Net Income?
Explanation:
Revenue − Expenses = Net Income
Total Tax divided by Total Income calculates this tax rate.
What is the Average Tax Rate?
Explanation:
Average Tax Rate = Total Tax ÷ Total Income
Unlike accounting income, this measures the actual money coming into and going out of a company.
What is Cash Flow?
Explanation: Cash flow measures actual cash movement, which is why Cash Flow ≠ Net Income.
Complete this equation: Assets = Liabilities + ______.
What is Stockholders' Equity?
Explanation: The basic balance-sheet equation is Assets = Liabilities + Stockholders' Equity.
Between cash and machinery, this asset is more liquid.
What is cash?
Explanation: Cash is already in spendable form, while machinery must first be sold.
This common noncash expense reduces accounting income even though no cash is actually spent that year.
What is Depreciation?
Explanation: Depreciation is an expense for accounting purposes, but it does not represent a current cash payment.
This is the tax rate that applies to the next dollar of income earned.
What is the Marginal Tax Rate?
Explanation: The marginal rate measures the tax paid on additional income.
CFFA is an abbreviation for this.
What is Cash Flow From Assets?
Explanation: CFFA is also referred to as Free Cash Flow in the chapter.
Current Assets minus Current Liabilities equals this.
What is Net Working Capital?
Explanation:
NWC = Current Assets − Current Liabilities
The historical cost of an asset shown in accounting records is called this.
What is Book Value?
Explanation: Book value reflects accounting records and historical cost.
A company has Net Income of $100,000 and 20,000 shares outstanding. Its Earnings Per Share is this amount.
What is $5 per share?
Explanation:
EPS = $100,000 ÷ 20,000 = $5
According to the chapter, this is the federal corporate tax rate.
What is 21%?
Explanation: The Chapter 2 slides identify the federal corporate rate as 21%.
EBIT + Depreciation − Taxes calculates this.
What is Operating Cash Flow?
Explanation:
OCF = EBIT + Depreciation − Taxes
A company has $70,000 in Current Assets and $45,000 in Current Liabilities. Its Net Working Capital is this amount.
What is $25,000?
Explanation:
$70,000 − $45,000 = $25,000
Land was purchased for $100,000 but could be sold today for $300,000. For financial decision-making, this amount is more important.
What is $300,000?
Explanation: The $300,000 represents market value, which is generally more relevant for financial decisions.
Accounting income can differ from cash flow because revenues and expenses are not always recorded when this actually changes hands.
What is cash?
Explanation: GAAP may recognize revenue when earned and match expenses to revenue even if cash is received or paid at another time.
A person earns $80,000 and pays $12,640 in taxes. Their average tax rate is approximately this percentage.
What is 15.8%?
Explanation:
$12,640 ÷ $80,000 = 15.8%
EBIT is $30,000, Depreciation is $5,000, and Taxes are $7,000. Operating Cash Flow equals this amount.
What is $28,000?
Explanation:
OCF = $30,000 + $5,000 − $7,000
OCF = $28,000
Compared with stockholders, these investors generally have the first claim on a company's cash flow.
Who are creditors?
Explanation: Creditors generally get paid before equity holders. Shareholders receive the residual value.
More liquid assets tend to be safer but generally earn this compared with less liquid assets.
What is a lower return?
Explanation: Greater liquidity generally means greater safety but a lower expected return.
Net income that is not distributed to shareholders as dividends can instead be kept by the company as this.
What are Retained Earnings?
Explanation: Net income can either be distributed as dividends or retained in the business.
A financial manager deciding whether earning one additional dollar of income is worthwhile should focus on this tax rate.
What is the Marginal Tax Rate?
Explanation: The marginal tax rate tells the manager how the next dollar of income will be taxed.
Operating Cash Flow is $40,000, Net Capital Spending is $15,000, and the Change in NWC is $5,000. Cash Flow From Assets equals this amount.
What is $20,000?
Explanation:
CFFA = OCF − Net Capital Spending − Change in NWC
CFFA = $40,000 − $15,000 − $5,000
CFFA = $20,000