FIN Ch. 2

Question 1

net working capital

Answer 1

current assets less current liabs.

Question 2

GAAP- generally accepted accounting principles

Answer 2

common set of standards & procedures by which audited financial statements are prepared

Question 3

income statement

Answer 3

financial statement summarizing firm’s performance over a period of time

Question 4

noncash items

Answer 4

expenses charged against revenues that do not directly affect cash flow such as depr

Question 5

avg tax rate

Answer 5

total taxes paid divided by total taxable income

Question 6

marginal tax rate

Answer 6

amt of tax payable on next dollar earned

Question 7

cash flow from assets (free cash flow)

Answer 7

total of cash flow to creditors & cash flow to stockholders, consisting of: operating cash flow, capital spending, and change in net working capital

Question 8

operating cash flow

Answer 8

cash generated from firm’s normal business activities

Question 9

cash flow to creditors

Answer 9

firm’s interest payments to creditors less net new borrowings

Question 10

cash flow to stockholders

Answer 10

dividends paid out by a firm less net new equity raised