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ECON 350 > Econ of Corps Exam 2 > Flashcards

Econ of Corps Exam 2 Flashcards

(78 cards)

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1
Q

Financial Statements

A

Firm-issued account reports with past performance information (quarterly and annually)

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2
Q

10-Q

A

Quarterly reporting form that US companies use to file their financial statements with the SEC

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3
Q

10-K

A

Annual reporting form that US companies use to file their financial statements with the SEC

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4
Q

Annual Report

A

Yearly summary of business sent by US public companies to their shareholders that accompanies or includes the financial statement

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5
Q

Generally Accepted Accounting Principles (GAAP)

A

Common set of rules and standard format for public companies to use when preparing their financial reports

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6
Q

Auditor

A

Neutral third party that corps are required to hire that checks the annual financial statements to ensure they are up to GAAP standards and to verify that the information is reliable

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7
Q

Four Financial Statements

A
  1. Balance Sheet
  2. Income Statement
  3. Statement of Cash Flows
  4. Statement of Stockholders’ Equity
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8
Q

Balance Sheet/ Statement of Financial Position

A

List of a firm’s assets and liabilities that provides a snapshot of the firm’s financial position at a given time

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9
Q

Assets

A

Cash, inventory, property, plant and equipment, and other investments a company has made

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10
Q

Liabilities

A

Firm’s obligations to its creditors / debts and financial obligations a company owes to others (includes loans, accounts payable, or other obligations the company must pay in the future)

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11
Q

Stockholders’ Equity

A

Accounting measure of a firm’s net worth that represents the difference between the firm’s assets and its liabilities (portion of the company’s assets that belongs to its shareholders after all debts and liabilities have been paid off)

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12
Q

Current Assets

A

Cash or assets that could be converted into cash within one year (includes marketable securities, accounts receivable, inventories, and prepaid expenses such as rent and insurance)

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13
Q

Marketable Securities

A

Short-term, low-risk investments that can be easily sold and converted to cash (such as money market investments, like government debt, that mature within a year)

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14
Q

Accounts Receivable

A

Amounts owed to a firm by customers who have purchased goods or services on credit (have been delivered but not yet paid for) (essentially the amount of money the company expects to receive in the future)

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15
Q

Inventories

A

Total value of a company’s goods that are available for sale including raw materials, work-in-progress items, and finished products (key asset because it indicates potential revenue a company can generate from sales)

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16
Q

Long-Term Assets

A

Valuable resources that a firm owns and plans to keep for more than a year including property, buildings, machinery, equipment, and intangible assets such as patents and trademarks

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16
Q

Depreciation Expense

A

Reduction in value of a long-term asset over time, reflecting wear and tear over a given period of time

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17
Q

Accumulated Depreciation

A

Total amount of depreciation expense of an asset recorded since it was acquired, reflecting how much value the asset has lost over time

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18
Q

Goodwill

A

The difference between the price paid for a company and the book value assigned to its assets

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19
Q

Intangible Assets

A

Non-physical assets, such as intellectual property, brand names, trademarks, and good will (intangible assets appear on the balance sheet as the difference between the price paid for an acquisition and the book value assigned to its tangible assets)

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20
Q

Amortization

A

A change that captures the change in value of acquired assets (like depreciation, amortization is not an actual cash expense)

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21
Q

Impairment Charge

A

Captures the change in value of the acquired assets (is not an actual cash expense)

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21
Q

Current Liabilities

A

Liabilities that will be satisfied within one year (includes accounts payable, notes payable, short-term debt, current maturities of long-term debt, salary or taxes owed, and defer of unearned revenue)

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22
Q

Accounts Payable

A

The amounts owed to creditors for products of services purchased with credit

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23
Short-Term Debt
Debt with a maturity of less than a year
24
Net Working Capital
The difference between a firm's current assets and current liabilities that represents the capital available in the short-term to run the business
25
Long-Term Liabilities
Liabilities that extend beyond a year
26
Long-Term Debt
Any loan or debt obligation with a maturity of more than a year
27
Capital Lease / Finance Lease
A lease viewed as an acquisition for accounting purposes (the asset acquired is listed on the lessee's balance sheet, and the lessee incurs depreciation expenses for the asset. In addition, the present value of the future lease payment is listed as a liability, and the interest portion of the lease payments is deducted as an interest expense)
28
Deferred Taxes
An asset or liability that results from the difference between a firm's tax expenses as reported for accounting purposes, and the actual amount paid to the taxing authority
29
Book Value of Equity / Stockholders' Equity
The difference between the book value of a firm's assets and its liabilities (represents the net worth of a firm from an accounting perspective)
30
Market Capitalization
The total market value of equity (equals the market price per share times the number of shares)
31
Market-to-Book Ratio (P/B) / Price-to-Book Ratio
The ratio of a firm's market (equity) capitalization to the book value of its stockholders' equity
32
Value Stocks
Firms with low market-to-book ratios
33
Growth Stocks
Firms with high market-to-book ratios
34
Income Statement / Statement of Financial Performance
A list of a firm's revenues and expenses over a period of time
34
Enterprise Value
Measures the value of the firm's underlying business (total market value of a firm's equity and debt minus the value of its cash and marketable securities)
35
Net Income or Earnings
The last line of a firm's income statement that is a measure of the firm's income over a given period of time
36
Operating Income
A firm's gross profit minus its operating expenses
37
Gross Profit
The third line of an income statement that represents the difference between a firm's sales revenues and its costs
38
EBIT
A firm's earnings before interest and taxes are deducted
38
Diluted EPS
A firm's disclosure of its potential for dilution from options it has awarded which shows the earnings per share the company would have if the stock options were exercised
38
Convertible Bonds
Corporate bonds with a provision that gives the bondholder an option to convert each bond owned into a fixed number of shares of common stock
39
Stock Options
A form of compensation a firm gives to its employees that gives them the right to buy a certain number of shares of stock by a specific date at a specific price
39
Dilution
An increase in the total number of shares that will divide a fixed amount of earnings (often occurs when stock options are exercised or convertible bonds are converted)
40
Statement of Cash Flows
An accounting statement that shows how a firm has used the cash it earned during a set period
41
Capital Expenditures
Purchases of new property, plant, and equipment
42
Statement of Stockholders' Equity
An accounting statement that breaks down the stockholders' equity computed on the balance sheet into the amount that came from issuing new shares vs. retained earnings
43
Management Discussion and Analysis (MD&A)
A preface to the financial statements in which a company's management discusses the recent year (or quarter), providing a background on the company and any significant events that may have occurred
44
Off-Balance Sheet Transactions
Transactions or arrangements that can have a material impact on a firm's future performance yet do not appear on the balance sheet
45
Gross Margin
The ratio of gross profit to revenue (sales)
46
Operating Margin
Reveals how much a company has earned from each dollar of sales before interest and taxes are deducted (ratio of operating income to revenues)
47
EBIT Margin
Ratio of EBIT to sales
48
Net Profit Margin
Shows the fraction of each dollar in revenues that is available to equity holders after the firm pays interest and taxes (ratio of net income to revenues)
49
Current Ratio
Ratio of current assets to current liabilities
50
Quick Ratio
Ratio of current assets other than inventory to current liabilities
51
Accounts Receivable Days
An expression of a firm's accounts receivable in terms of the number of days' worth of sale that the accounts receivable represents
52
Cash Ratio
Most stringent liquidity ratio (ratio of cash to current liabilities)
53
Accounts Payable Days
An expression of a firm's accounts payable in terms of the number of days' worth of cost of goods sold that the accounts payable represents
54
Inventory Days
An expression of a firm's inventory in terms of the number of days' worth of cost of goods sold that the inventory represents
55
Turnover Ratios
Shows how efficiently a company uses its working capital by comparing its annual sales or costs to key accounts such as accounts receivable, accounts payable, and inventory (essentially shows how many times these accounts are "turned over" or used up during the year)
56
Inventory Turnover
A measure of how efficiently a firm is managing its inventory (ratio of the annual cost of sales to inventory)
57
Accounts Receivable Turnover
A measure of how efficiently the firm is managing accounts receivable (ratio of annual cost of sales to accounts receivable)
58
Accounts Payable Turnover
A measure of how quickly the firm is paying its supplies (ratio of annual cost of ales to accounts payable)
59
Interest Coverage Ratio
An assessment by lenders of a firm's leverage (Common ratios consider operating income, EBIT, or EBITDA as a multiple of the firm's interest expenses)
60
EBITDA
A computation of a firm's earnings before interest, taxes, depreciation, and amortization are deducted
61
Leverage
The extent to which a company uses borrowed money (debt) in order to finance investments
62
Debt-Equity Ratio
Ratio of a firm's total amount of short and long term debt (including current maturities) to the value of its equity, which can be calculated based on market or book values
63
Debt-to-Capital Ratio
The ratio of a firm's total amount of short and long term debt (including current maturities) to the sum of the value of its debt and the value of its equity, which can be calculated based on market or book values
64
Net Debt
Total debt outstanding minus any cash balances
65
Debt-to-Enterprise Value Ratio
The fraction of a firm's enterprise value that corresponds to net debt
66
Equity Multiplier
Measure of leverage that indicates the value of assets held per dollar of shareholder equity
67
Price-Earnings Ratio (P/E)
The ratio of the market value of equity to the firm's earnings, or its share price to its earnings per share
68
Return on Equity (ROE)
The ratio of a firm's net income to the book value of its equity (most comparable to the firm's required return on equity)
69
Return on Assets (ROA)
The ratio of net income plus interest expense to the total book value of the firm's assets (this measure of ROA include the benefit of the interest tax shield associated with leverage) (most comparable to the firm's unlettered cost of capital)
70
Return on Invested Capital (ROIC)
The ratio of a firm's after-tax profit excluding any interest expense (or income) to the sum of the book value of its equity and net debt (most comparable to the firm's weighted average cost of capital)
71
DuPont Identity
Expression of the ROE in terms of the firm's profitability, asset efficiency, and leverage
72
Asset Turnover
A measure of how efficiently the firm is utilizing its assets to generate sales (ratio of sales to assets)

ECON 350 (3 decks)

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