FIN 3403 - Chapter 3-4 Vocab

Vocab for Chapters 3-4 in Dr. Whyte's Spring 2023 FIN 3403 class

Form 10-K

An annual report that is filed with the SEC that presents the company’s financial results and commentary about the financial performance in the “Management Discussion and Analysis” section

Income Statement

AKA Profit and Loss statement, indicates the amount of profits generated by a firm over a given time, such as a year. Basically, sales-expenses=profits

Cost of Goods Sold

The direct costs of producing or acquiring a product or service to be sold

Gross Profit

Sales or revenue-COGS

Operating Expenses

The expenses used in marketing, selling, general and admin. expenses (includes depreciation). Gross profit-operating expenses= operating income (AKA operating profits or EBIT).

Operating Income

Gross profit-operating expenses= operating income (AKA operating profits or EBIT).

Earnings Before Taxes

Operating income-interest expense=Taxable income.

Net Income

The income that may be reinvested in the firm or distributed to its owners (aka earnings available to common shareholders)

Earnings Per Share

Net income / outstanding common shares

Common Sized Income Statement

An income statement where the firm’s expenses and profits are expressed as a % of sales

Gross Profit Margin

Gross Profit/Sales, a ratio that measures the gross profits as a % of sales

Balance Sheet

Provides a snapshot of a company’s financial position at a specific point in time, presents assets, liabilities, and stock-holder equity

Book Value

Reported by balance sheet, reports an asset’s historical cost and not it’s current market value. Total BV is all of the assets on the balance sheet

Debt

Money that has been borrowed and must be repaid at a predetermined date

Equity

Shareholder’s investment in the company

Current Assets

AKA gross working capital, assets expected to be converted to cash within a year (cash, A.R, inventory, etc.)

Accounts Recievable

Amounts owed to the company by clients who buy on credit

Inventories

Raw materials, work in progresses, finished goods

Fixed Assets

(Property, plant, equipment) Assets used over a number of years (machinery, equipment, land, buildings, etc.)

Depreciation

The amount allocated as a cost to an asset each year

Accumulated Depreciation

The sum of all depreciation for an asset over its entire life

Accounts Payable

The amount of credit suppliers have extended to the firm when it purchased inventory, AKA trade credit

Accrued Expenses

Short-term liabilities that have been incurred n the firm’s operations but not paid yet

Short Term Notes

Amounts borrowed from a lender that are due within a year

Long Term Debt

Amounts borrowed from a lender that are due beyond a year

Mortgage

A loan to finance real estate, where the lender has first claim in the event of default

Preferred Stockholders

Generally receive a fixed-dividend, and in the event of liquidation are paid after the creditors and before the common shareholders

Common Stockholders

The residual owners of a business, receives whatever is left over after paying expenses

Par Value

An arbitrary amount a firm puts on each share when sold, usually a dollar or penny

Paid In Capital

AKA capital surplus, The amount of money a firm receives when it issues new shares to investors that is above par value ((Share price-Par value) x shares=PIC)

Retained Earnings

The amount of net income retained in the business rather than being distributed to shareholders

Common Sized Balance Sheet

A balance sheet where individual assets, liabilities, and equities are all represented  as %’s of their totals (I.e an asset is 20% of all assets)