Chapter 2 Flashcards
(24 cards)
Shareholder/Owner’s Equity
Total Assets = Total Liabilities + Total Equity. Doesn’t include common stock or paid interest. Only relates to what the owners or shareholders (corporation) would be able to have in the company not outside investors.
Net Working Capital Formula
Current Assets (CA) - Current Liabilities (CL)
Net Income Formula
EBT - Tax Expense
Addition to Retained Earnings Formula
Net income - Dividends
Earnings Per Share (EPS) Formula
Net income / Total shares outstanding
Dividends Per Share (DPS) Formula
Total dividends / Total shares outstanding
Balance Sheet
Shows all assets, liabilities, and equity. Total Assets = Total Liabilities + Total Equity
Liquid Assets
Assets that are able to be turned into cash.
Intangible Fixed Asset
Non-physical assets such as patents and trademarks.
Tangible Fixed Asset
Physical assets such as buildings and equipment.
Current Asset
Assets that are relatively liquid or expected to be converted into cash within 12 months.
Liabilities
Current Liability + Long Term Debt
Accounts Payable
Money owed by a company to its creditors.
Notes Payable
Written promises to pay a certain amount of money at a future date.
Common Stock and Paid-in Surplus
Equity investments made by shareholders.
Retained Earnings
Profits that are reinvested in the company instead of being distributed as dividends.
Owners Equity
Owners Equity = Total assets - Total liabilities
Income Statement
Measures the results of a firm’s operation. Sales - Costs = Gross Profits.
EBIT
Earnings Before Interest and Taxes. EBIT = Gross Profits - Operating Expenses (depreciation).
EBT
Earnings Before Taxes. EBT = EBIT - Interest expenses.
Tax Expense Formula
EBT * Tax Rate
Total Assets Formula
Total Assets = Total Liabilities + Total Equity
Equity Formula
Equity includes: Common Stock + Preferred Stock + Retained Earnings
Income Statement Formula
Sales - Costs = Gross Profits. Gross Profits - Operating Expenses (depreciation) = EBIT. EBIT - Interest expenses = EBT. EBT - Tax expense (EBT*Tax Rate) = Net Income. Net Income - Dividends = Change of Retained Earnings.
