Fourth Quarter Overview

Question 1

Income Statement

Answer 1

A financial statement showing the revenue and expenses for a fiscal period.

Question 2

Balance Sheet

Answer 2

A financial statement that reports assets, liabilities, and owner’s equity on a specific date.

Question 3

Operating Cash Flow

Answer 3

• Cash generated from a firm’s normal business activities
• Inbound: Money made from sales
• Outbound: Money spent on supplies/utilities

Question 4

Investing Cash Flow

Answer 4

• Inbound: money spent on equipment
• Outbound: Money made from return of investment

Question 5

Financing Cash Flow

Answer 5

• Inbound: what you are earning
• Outbound: what is spent

Question 6

Net Sale Equation

Answer 6

Sales - Sales Discounts - Sales Returns and Allowances

Question 7

Gross Profit Equation

Answer 7

net sales - cost of goods sold

Question 8

Current Assets

Answer 8

Items that can or will be converted into cash within one year

Question 9

Fixed Assets

Answer 9

Assets that are relatively permanent, such as land, buildings, and equipment

Question 10

Current Liabilities

Answer 10

Liabilities due within a short time, usually within a year

Question 11

Long-Term Liabilites

Answer 11

Liabilities owed for more than a year
(Ex. mortgage)

Question 12

Cash Flow Statement

Answer 12

A financial statement that shows the flow of money in and out of the business’ operating, investing, and financing activities

Question 13

Ratio Analysis Equation

Answer 13

Current Ratio = Current Assets / Current Liabilities

Question 14

Break-Even Analysis

Answer 14

The process of determining the number of units a firm must sell to cover all costs

Question 15

EBITDA Meaning

Answer 15

Earnings before income tax and depreciation

Question 16

Accounts Receivable

Answer 16

Money owed to the business (asset)

Question 17

Accounts Payable

Answer 17

Money owed by the business (liability)

Question 18

Working Capital

Answer 18

current assets - current liabilities

Question 19

Different Ways to Value a Business (Tangible)

Answer 19

-Replacement
-Earnings
-Market
-Liquidation

Question 20

Different Ways to Value a Business (Intangible)

Answer 20

-Goodwill
-Patent
-Copyright
-Trademarks

Question 21

Intangible Assets

Answer 21

Assets that do not have physical substance

Question 22

Tangible Assets

Answer 22

• Physical Assets
• Physical things, such as automobiles, clothing, land, or buildings

Question 23

Different Fund Sources

Answer 23

-Loans
-Angel investors
-Friends/family
-Grants

Question 24

SBA Loan

Answer 24

A loan granted by the Small Business Administration that can be used to start/finance a business

Question 25

SBA 7(a) Loan

Answer 25

-Up to $5 million -simple application process -eligibility for profit -small business -business must be based and operating in the USA -must need loan -must use it for a sound business purpose -can not be delinquent on USA obligations -credit worthy

Question 26

SBA 504 Loan

Answer 26

-For profit -worth less than $15 million -net income = less than $5 million after taxes (2 years prior to application) -up $5 million -only used for fixed assets -varies based on SBA guidelines

Question 27

SBA Microloan

Answer 27

-Up to $50k -Every lender makes their own decision

Question 28

W2

Answer 28

A form filled out by the employer at the end of each tax year for the employee and is a statement of income and withholdings for that tax year

Question 29

W4

Answer 29

A form filled out by the employee when the employee accepts a new job or at any time after that when the employee wants to change filing status or withholding allowances

Question 30

Ways to Harvest a Business

Answer 30

-Distribute cash flows -Go public and offer stock -Use a private equity recapitalization -Sell the firm

Question 31

Gross Pay

Answer 31

Pay before deductions

Question 32

Net Pay

Answer 32

take-home pay after deductions

Question 33

Overtime

Answer 33

Time worked beyond the regular hours (1.5x normal rate)