Corporate Income Taxes
Time Value of Money Cont.
Financial Statement Ratios
Cash Flow Use or Source
Hodge Podge
100
The corporate tax on EBT of $37,000
What is $5,550? $37,000 x .15 = $5,550
100
PV x (1 + r)^n
What is Future Value?
100
Current assets/current liabilities
What is current ratio?
100
Asset increase
What is a use?
100
Cash flow generated from its normal operations NOPAT + Depreciation
What is operating cash flow (OCF)?
200
The corporate tax on EBT of $88,500
What is $18,340? 50,000 x .15 = 7,500 25,000 x .25 = 6,250 13,500 x .34 = 4,590 $18,340
200
FVn/(1+r)^n
What Present Value?
200
COGS/Inventory
What is Inventory Turnover?
200
Liability increase
What is a source?
200
OCF – Net fixed asset investment (NFAI) – Net current asset investment (NCAI)
What is free cash flow (FCF)?
300
The corporate tax on EBT of $14,000,000
1. What is $4,800,000? 10,000,000 x .34 = 3,400,000 4,000,000 x .35 = 1,400,000 4,800,000
300
An annuity with an infinite life.
What is a perpetuity?
300
Total liabilities/total assets
What is debt ratio?
300
Asset decrease
What is a source?
300
The primary goal of financial managers
What is Maximize shareholder wealth of firm’s owners-the stockholders?
400
The corporate tax on EBT of $23,500,000
What is $8,225,000? $23,500,000 x .35 = $8,225,000 (See Example 2.6d)
400
Often referred to discounting cash flows which is the inverse of compounding interest
What is Present Value?
400
Sales-COGS/sales
What is gross profit margin?
400
Liability decrease
What is a use?
400
Five basic categories of financial ratios
What are liquidity, activity, market, debt and profitability ratios?
500
The income statement line item that is the corporation's taxable income
What is EBT?
500
A higher rate of interest makes the present value of a future amount smaller or larger
What is smaller?
500
Market Price per share of common stock/book value per share of common stock
What is Market/book (M/B) ratio?
500
Cash generated by operations that’s available for distribution to investors.
What is free cash flow?
500
Also referred to as opportunity cost, discounted rate, or cost of capital.
What is annual rate of return?
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