Chapter 3: Financial Statements, Cash Flow, and Taxes Flashcards Preview

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Flashcards in Chapter 3: Financial Statements, Cash Flow, and Taxes Deck (22):
1

What is an annual report?

- Annual report
- From corporations -> stockholders
- Financial Statements
- Management analysis of past events and future prospects

2

What four financial statements found in annual report?

- Balance sheet
- Income statement
- Cashflow statements
- Stockholders' equity statements

3

What is a balance sheet?

- Financial standing
- Specific point in time

4

What is stockholders' equity?

- Original capital invested by stockholders
- Earnings retained by company

5

What is retained earnings?

- Cumulative total earnings held by company

6

What is working capital?

- Current assets

7

What is net working capital?

Current assets - current liabilities

8

What is net operating working capital?

Current assets - non interest bearing current liabilities

9

What is income statement?

- Summarises revenues, expenses and profit

10

What is operating income?

- Earnings before interests and taxes

11

What is depreciation?

- Charge of assets depletion during production

12

What is amortisation?

- Similar to depreciation
- Charge of non-tangible assets E.g Patents, copyrights

13

What is EBITDA?

- Earnings before interests, taxes, depreciation and amortization.

14

What is statement of cash flows?

-Shows how items affect balance sheet and income statement affect firm's cash flows

15

What is the statement of stockholder's equity?

Describes how the company's equity had changed and why did it happen.

16

What is free cash flow?

- Ability of company to use cash without harming is ability to operate and produce future cash flows.

17

What is Net Operating Profit After Taxes (NOPAT)?

- Profit company generates
- No debts
-Only operating assets

18

What is Market Value Added? (MVA)

The difference in the market value of equity over its book value (historical cost).

19

What is Economic Value Added (EVA)

- Excess of NOPAT over capital costs
- True profit after removing capital costs from NOPAT

20

What is progressive tax?

-Higher tax rate for higher tax income.

21

What is marginal tax rate?

- Calculated from the base amount of the tax bracket.

22

What is average tax rate?

Taxes paid divided by taxable income.