Flashcard: Fundamentals of Corporate Financial Statements — 22 carte

Corporation — legal entity?

Separate from its owners with its own rights.

Financial statements overview?

Balance sheet, income statement, and cash-flow statement.

Balance sheet components?

Assets, liabilities, and equity.

Assets — types?

Current and long-term assets.

Depreciation — purpose?

Allocates asset cost over useful life.

Liabilities vs Equity?

Liabilities are obligations; equity is owner’s residual interest.

Working capital — formula?

Current assets minus current liabilities.

Market vs book equity?

Market value based on stock price; book based on accounting.

Income statement — focus?

Profitability over a period.

Financial ratios — purpose?

Assess performance, liquidity, leverage, and valuation.

Profitability ratios?

Measure profit relative to sales, assets, or equity.

Gross margin — calculation?

Gross profit divided by sales.

EBITDA margin — excludes?

Interest, taxes, depreciation, amortization.

Net income — also called?

Bottom line or net profit.

Balance sheet — equation?

Assets = Liabilities + Equity.

Current liabilities?

Obligations due within one year.

Net fixed assets?

Property, plant, equipment minus depreciation.

Capital employed — includes?

Fixed and circulating capital invested in operations.

Market-to-book ratio?

Market value divided by book value.

Income statement — main elements?

Revenues, expenses, net income.

Profit margin ratios?

Gross, EBITDA, EBIT, net profit margins.

Depreciation — effect?

Reduces asset book value over time.