Financial Statements
An approach to recording and measuring financial performance on the change of value of a company's assets and liabilities over time, instead of accounting only for flows of cash into and out of the company
What is accrual-based accounting?
= units sold * price
What is Revenue?
The difference between revenue and costs
What is profit?
The tendency for a nation's currency to lose its value relative to society's goods
What is inflation
Good projects should have a negative NPV (Net Present Value)
What is false
Records changes in value in the company over a time period, specifically listing the company’s revenue, its expenses, and the difference between the two
What is the income statement?
= Fixed costs + (units produced * Variable costs/unit)
What is total cost?
Something of value that is owned by a company or person.
What is an asset?
The uncertainty of future events, including, the timing and size of future cash flows
What is risk
A project with a NPV of $50M should be selected over a project with a NPV of $5M
What is True
Provides a snapshot of the value of a business' assets, liabilities, and shareholders' equity at a given point in time
What is the balance sheet
= gross income / revenue
What is gross margin?
Costs that are not associated with a particular product or service of a company
What is overhead?
The compensation the average person expects for forgoing consumption in the present in order to save or invest
What is opportunity cost
Accounts receivable captures the total amount of outstanding payments from customers for services rendered and goods delivered
What is true?
Records the inflows of cash from different sources and outflows of cash to different uses over the course of a specific time period
What is the cash flow statement?
= Fixed costs / (unit price - cost)
What is Breakeven Point?
The three main financial statements of accrual accounting
What is balance sheet, cash flow statement, and income statement?
Minimum rate of return investors demand from a company in order to compensate them for inflation, opportunity cost, and risk
What is the cost of capital
Accounts payable captures the total amount of outstanding payments from vendors for services rendered and goods delivered.
What is false?
A set of rules and guidelines adopted in the United States to standardize accounting and reporting across many companies and industries.
What is GAAP (Generally accepted accounting principles)?
= future value / (1 + cost of capital)
What is Present Value?
A measure of a business project's value
NPV (net present value)
The value of future cash flows discounted by the cost of capital
What is Present Value
The Internal Rate of Return (IRR) measures the hypothetical cost of capital at which a project's NPV is $0 and does not take a project's size into account
What is True