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16 terms

ch3 understanding financial statements and cash flows

chapter 3
STUDY
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balance sheet
statement that shows a firms assets, liabilites, & shareholders equity at any given point; snapshot of firms financial position at any given point
cash
cash on hand, demand deposits, & short term marketable secrurites that can be quickly be converted to cash
common stock
shares that represent ownership ina corporation
common stockholders
investors who own the firms common stock; ommon stockholders are the residual owners of the firm
cost of goods sold
cost of producing or acquiring a product or service to be sold in the ordinary course of business
current assets (gross working capital)
consist primarily of cash, marketable securities, accounts receivalble, inventories, & prepaid expenses
current debt (short term liabilites)
due to be paid within 12 months
debt
liabilities consisting of such sources as credit extended by suppliers or a loan from a bank
equity
stockholders' investment in the firm and the cumulative profits retained in the business up to the date of the balance sheet
financing cash flows
cash flows paid to or received from investors and lenders
fixed assets
assets such as equipment, buildings & land
free cash flow
amount of cash available from operations after the firm pays for the investments it has made in operating working capital and fixed assets; this cash is available to distribute to the firms creditors and owners
income statement (profit & loss statement)
a basic accounting statement that measures teh results of a firms operations over a specified period, commonly 1yr; aka 'profit & loss' statement; bottom line shows the firms profit or loss for the period
long term debt
loans from banks or other sources that lend money for longer than 12 months
retained earnings
cumulataive profits retained ina business up to the date of the balance sheet
short term liabilities
same as current debt