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Four Major Financial Statements

Balance Sheet, Income Statements, Statement of Cash Flows, Statement of Retained Earnings

Balance sheet represents

a "snapshot" in time.

Income Statement represents

a "period" of time.

Formula for Approximating Cash Flow

NCF=Net Income + Depreciation + Amortization


Earnings Before Interest and Tax

Another Name for EBIT and its representation

Operating Income and Sustainability

Formula for NOPAT

EBIT * (1-T)

Four types of Financial Ratios

Liquidity, Asset Management, Debt Management, Profitability

Liquidity Ratios

Shows relationship between firms cash/current assets/liabilities. Ex: Current Ratio, Quick Ratio

Assets Management

Helps measure how effective firm uses assets. Ex: Inventory Turnover, Days Sales Outstanding

Debt Management

Determines firms leverage when involving debt. Ex: Deb Ratio, Debt to Equity Ratio

Profitability Ratios

Helps figure out what percent the company made. Ex: Profit Margin on Sales/Return on Total Assets

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