1. Balance sheet
a. Assets
Cash and Cash Equivalents
Marketable securities
Accounts receivable
Inventories
Net property, plant and equipment
Intangible assets
b. Liabilities
Accounts payable
Notes payable
Accrued expenses
Deferred taxes – reflects the difference between the taxes and the tax liabilities Long-term debt – debt that matures more than one year in the future
c. Stockholders’ equity
Preferred stock – form of ownership that has preference over common stock when the firm distributes income and assets Common stock – most basic form of corporate ownership
Par value – arbitrary value assigned to common stock on a firm’s balance sheet Paid-in capital in excess of par – number of shares outstanding multiplies by the original selling price of the shares, net of the par value Retained earnings – cumulative total of the earnings that a firm has reinvested since its inception Treasury stock – common shares that were issued and later reacquired by the firm
2. Income statement
Common-size income statement – income statement which all entries are expressed as a percentage of sales Earnings available for common stockholders – net income net of preferred stock dividends Earnings per share (EPS) – earnings available for common stockholders dividend by the number of common stock outstanding
Dividends per share (DPS) – portion of the earnings per share paid to stockholders
The Term Paper on Common Stock Capital Income Sales
... Bonds 54000 Income before tax -54000 Income Tax -13500 Net Income -40500 Preferred Stock Dividends 0 Total income from common stock -40500 Common stock shares outstanding 975000 Earnings per common stock share -0. 042 ... capital for this same year was funded by a total stockholders' equity of $2336617. Working Capital is obtained from adding all ...
3. Statement of Retained Earnings
4. Statement of Cash Flows
5. Notes to Financial Statements
cash flow ANALYSIS
1. Operating flows – cash inflows and outflows directly related to the production and sale of a firm’s products or services 2. Investment flows – cash flows associated with the purchase or sale of fixed assets 3. Financing flows – cash flow that result from debt and equity financing transactions
Free cash flow (FCF) – net amount of cash flow remaining after the firm has met all operating needs
Net operating profits after taxes (NOPAT) – amount of earnings before interests and after taxes
Operating cash flow (OCF) – amount of cash flow generated by a firm from its operations
Noncash charges – expenses that appear in the income statement but do not involve an actual outlay of cash
Inflow and Outflow of Corporate Cash
Inflow
Outflow
Decrease in asset
Increase in asset
Increase in liability
Decrease in liability
Net income
Net loss
Depreciation
Dividends paid
Sae of common or preferred stock
Repurchase or retirement of stock
FINANCIAL RATIOS
1. Liquidity ratios – measures a firm’s ability to satisfy its short-term obligations as they come due
2. Activity ratios – measure of the speed with which a firm converts various accounts into sales
3. Debt ratios – measure of the proportion of total assets financed by a firm’s creditors
Financial leverage – using fixed-cost sources of financing to magnify both the risk and the expected return on a firm’s securities Equity multiplier – measure of the proportion of total assets financed by a firm’s equity
4. Profitability ratios – most closely watched and widely quoted financial ratios
Return on assets – measure of the overall effectiveness of management in generating return to common stockholders with its available assets
Return on equity – measure that captures te return earned on the common stockholders’ investment in a firm
DuPont system – analysis that uses both income statement and balance sheet information to break the ROA and ROE ratios into component pieces
The Dissertation on Related Literature to the Cash Flow Management
... and 230 non-bankrupt firms and three measures of cash flow information, viz. CFFO, CFFO/Current ... asset purchases, and payment of cash dividends (Ryan 2007). Read more: http://www. ukessays. om/dissertation/literature-review/literature-review-on-cash-flow-statements. php#ixzz2WGgTfcVF Review of Cash Flow ... cash flow variables significantly improved the classification accuracy of the six accrual ratios ...
5. Market ratios – relate a firm’s market value, as measured by its current share price, to certain accounting values Price/Earnings (P/E) ratio – measure of a firm’s long-term growth prospects that represents the amount investors are willing to pay for each dollar of a firm’s earnings
Market/Book (M/B) ratio – measure used to assess a firm’s future performance
CORPORATE TAXES
1. Ordinary corporate income – income resulting from the sale of a firm’s goods and services a. Average tax rate – a firm’s liability divided by its pretax income b. Marginal tax rate – tax rate applicable to a firm’s net dollar earnings 2. Corporate capital gains
a. Capital gain – difference between the sales price and the initial purchase price of a capital asset b. Capital loss – loss resulting from the sale of a capital asset at a price below its book or accounting value
TIME VALUE OF MONEY – financial concept that explicitly recognizes that S1 received today is worth more than S1 received in the future
FUTURE VALUE – value of an investment made today measured at a specific future date accounting future interest earned over the life of the investment Simple interest – interest paid only on the initial principal of an investment Principal – amount of money on which interest is paid
Compound interest – interest earned both on the initial principal and on the interest earned in previous periods
Time line – graphical representation of cash flows over a given period of time
PRESENT VALUE – value today of a cash flow to be received at a specific date in the future, accounting for the opportunity to earn interest at a specified rate
Discounting – process of calculating present values
FUTURE VALUE OF CASH FLOWS STREAMS
The Coursework on House Prices Interest Rate
... rents The cost of building materials Interest rates (mortgage rates) Expectations of future price increases The ratio of ... at variable rates of interest. This means your lender sets an interest rate and from time to time this will ... monthly fall for two years - and an annual rate of 11. 2%. The Halifax puts the average ... It includes the output of foreign owned firms that are located in the UK. Money: ...
Mixed stream – series of unequal cash flows reflecting no particular pattern Annuity – stream of unequal periodic cash flows over a stated period of time
TYPES OF ANNUITIES
Ordinary annuity – annuity for which the payments occur at the end of each period Annuity due – annuity for which the payments occur at the beginning of each period Perpetuity – level of cash flow stream that continues forever
ADVANCE APPLICATIONS OF TIME VALUE
Semiannual compounding – interest compounds twice a year
Quarterly compounding – interest compounds four times per year
Continuous compounding – interest compounds literally at every moment as time passes
Stated annual rate – contractual annual rate of interest charged by a lender or promised by a borrower Effective annual rate (EAR) – annual rate of interest actually paid or earned, reflecting the impact of compounding frequency Annual percentage rate (APR) – stated annual rate calculated by multiplying the periodic rate by the number of periods in one year Annual percentage yield (APY) – annual rate of interest actually paid or earned, reflecting the impact of compounding frequency Loan amortization – occurs when a borrower pays back the principal over the life of the loan, often in equal periodic payments Loan amortization schedule – used to determine loan amortization and the allocation of each payment to interest and principal.
