Review of Balance Sheet and Income Statement

Flashcards covering key concepts from the balance sheet and income statement, emphasizing financial definitions and relationships.

Balance Sheet

A financial statement that provides a snapshot of a company's financial health at a specific point in time, showing assets, liabilities, and equity.

Liquidity

The ease with which an asset can be converted into cash without significant loss of value.

Net Working Capital (NWC)

Calculated as current assets minus current liabilities; indicates a company's ability to pay off its current debts.

Financial Leverage

The use of borrowed funds to increase the potential return on investment.

Market Value

The current price at which an asset or company is traded in the market; reflects investor's projection of firm performance.

Book Value

The value of an asset or company recorded in financial statements, based on historical cost minus depreciation.

Net Income

A company's profit after all expenses, including taxes and costs, have been deducted from total revenues.

Operating Cash Flow (OCF)

The cash generated from a company's core business operations, calculated as EBIT plus depreciation minus taxes.

Cash Flow to Creditors (CFC)

The net cash flow that a company pays to its creditors, calculated as interest paid minus net new borrowing.

Cash Flow to Stockholders (CFS)

The net cash flow that a company pays to its shareholders, calculated as dividends paid minus net new equity raised.