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balance sheet snapshot of the firm. a convenient way of organizing and summarizing what a firm owns (assets), what a firm owes (liabilities), and the difference between the two (the firm's equity) at a given point in time. the assets of the firm on a balance sheet, what is listed on the left hand side? liabilities and equity what is listed on the right hand side of the balance sheet? current or fixed assets are classified as either ______ or ________. tangible or intangible fixed assets can either be tangible or intangible less than a year how long is the life of a current asset? accounts receivable money owed to the firm by its customers current or long-term liabilities are listed as either ______ or _________. less than one year (meaning they must be paid within one year) how long is the life of current liabilities? accounts payable money the firm owes to its suppliers long term liability a debt that is not due in the coming year is classified as a ______ ________ ________. bonds long-term debt bondholders long-term creditors shareholder's equity aka common equity the difference between the total value of the assets (current and fixed) and the total value of liabilities (current and long-term) assets liabilities + shareholder's equity = net working capital the difference between a firm's current assets and its current liabilities liquidity the speed and ease with which an asset can be converted to cash. illiquid asset an asset that cannot be quickly converted to cash without a substantial price reduction. assets - liabilities shareholder's equity = financial leverage the use of debt in a firm's capital structure Generally Accepted Accounting Principles (GAAP) The common set of standards and procedures by which audited financial statements are prepared. = income revenues - expenses income statement financial statement summarizing a firm's performance over a period of time. noncash items expenses charged against revenues that do not directly affect cash flow, such as depreciation. average tax rate total taxes paid divided by total taxable income marginal tax rate amount of tax payable on the next dollar earned cash flow from assets the total of cash flow to creditors and cash flow to stockholders, consisting of the following: operating cash flow, capital spending, and change in net working capital. operating cash flow cash generated from a firm's normal business activities cash flow from assets cash flow to creditors + cash flow to stockholders free cash flow another name for cash flow from assets cash flow to creditors a firm's interest payments to creditors less net new borrowings. cash flow to stockholders dividends paid out by a firm less net new equity raised. market value the goal of financial management is to maximize the ________ _________ of the stock, not its book value. depreciation net income as it is computed on the income statement is not cash flow. a primary reason is that _________, a noncash expense, is deducted when net income is computed. marginal marginal and average tax rates can be different, and it is the _________ tax rate that is relevant for most financial decisions. 35% the marginal tax rate paid by the corporations with the largest incomes is 35%. cash flow to creditors and stockholders there is a cash flow identity much like the balance sheet identity. it says that cash flow from assets equals _________ ___________ ___ _______ and _________.