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Finance Module 1
Terms in this set (59)
Step 1: Understanding the Business Environment and Accounting Information
Step 2: Adjusting and Assessing Financial Information and Accounting Information.
Step 3: Forecasting Financial Information
Step 4: Using Information for Valuation
4-step Process for Financial Statement Analysis and Valuation
Prior FS are inputs into:
Current FS reflect __ and __
managers and employees
investment analysts and information intermediaries
Creditors and Suppliers
Shareholders and directors
Customers and strategic
regulators and tax
Demand for financial accounting information extends to numerous users that include:
1) ____ and ____
2) ____ ____ and __ ___
3) __ and ___
4) ___ and ___
5) ___ and ____ partners
6) ___ and ___ agencies
7) ___ and their _____
Primary SEC filing requirements
the audited annual report that includes the four financial statements, with explanatory notes and the management's discussion and analysis (MD&A) of financial results.
the unaudited quarterly report that includes summary versions of the four financial statements and limited additional disclosures
Funds and labor
Benefits of Disclosure:
- Lower costs of ___ and ___
- ____ benefits from reliable disclosures
preparation and dissemination
Costs of Disclosure:
- ____ and _____
- _____ disadvantages
- ____ potential
- ___ costs
Statement of Cash Flows
Statement of Stockholders' Equity
What statements link the BS at the beginning of the period and the BS at the end of the period.
What are the three activities seen within an organization.
How are they investing?
First question you should ask about an organization
Assets deal with what?
Liabilities are what?
Equity is what?
Investing = Nonowner Financing + Owner Financing
Equivalent equation to the accounting equation
Total assets is the company's total ____
Liabilities deal with how a company is ____
Liabilities are whose claims on resources
An income statement reports on ___ ___
- Operating Expenses
- Interest Expenses
- Tax Expense
Typical equation for IS
Costs incurred to generate revenues
Goods/services provided to customers produce:
The statement of stockholders' equity reports on key types of equity over a period of time. What are they?
the stockholders' net contributions to the company
net income over the life of the company minus all dividends ever paid
the equity of outside stockholders
Changes in balances over a period
For the Statement of Stockholders' Equity, what is shown betwee the beginning period and ending period amounts
The statement of cash flows reports on cash ___ and ___ from ___ , ___, and ____activities over a period of time.
The income statement and the balance sheet are linked via:
both on the statement of stockholders' equity and the balance sheet.
Retained earnings, contributed capital, and other equity balances appear where
net income is a component of operating cash flow.
How is the statement of CFs linked to the IS
Big profitability analysis measure
Profit Margin x Asset Turnover
Breakdown of ROA
Asset Turnover deals with ____
Profit Margin Formula
Asset Turnover Formula
Cash on BS
The cash and cash equivalents at end of year on the CF statement should link to what
Price per Share x # of shares outstanding
Market Capitalization Formula
What company has the largest market cap
What is Beta
A lower one
What type of beta is better
If the market goes up by 1%, the stock price will go up by .85% and vice versa
What kind of effect does a .85 Beta have on a company
All publicly available information
What you see in the market reflects what?
1) What LT investments should the firm take on? [Uses of Resources] - Investing
2) Where will we get the LT financing to pay for the investment? [ Sources of Resources] - Financing
3) How will we manage the everyday financial activities of the firm? [Resource Management] - Operating
Financing Activities Questions and which activity does each deal with
LT --> Investing and Financing
ST --> Operating
Which activities are considered LT and which are considered ST
Most important activity when starting a company
Which activity is the second and third important activity when starting a business?
What does not generate anything therefore a company does not really want too much on FS
Increase: Dividends are declared
Decrease: Dividends are paid out (the company has less money, thus less value)
When Dealing with Dividends, what causes teh stock price to increase and decrease
What does a company use to buy back shares which causes what to flow out
Shareholders because their shares will be worth more [ used to own 25% and now own 50% of all outstanding shares]
When a company buys back shares, who benefits?
A repurchase of stock causes what to happen to the stock price?
Who does net income belong to
Dividends or R/E
Where are two places Net Income goes to at the end of the day:
When looking at the ROA Formula, N/I is related to what?
When looking at the ROA Formula, Total Assets is related to what?
How you use it.
With ROA, where you get financing does not matter, but what does matter?
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