Financial Statements and Ratios Lecture Notes

These flashcards cover key concepts and definitions related to financial statements, ratios, and investment analysis from the lecture notes.

Financial Statements

Reports that summarize the financial performance and position of a company.

Balance Sheet

A financial statement that reflects a company’s assets, liabilities, and stockholders' equity at a specific point in time.

Income Statement

A financial statement that shows a company’s revenue, expenses, and profits over a given period.

Statement of Cash Flows

A report that details how cash is generated and spent during a particular period.

Stockholders' Equity

The residual interest in the assets of a company after deducting liabilities.

Current Assets

Assets expected to be converted to cash within one year, such as cash, accounts receivable, and inventory.

Long-Term Assets

Assets that are not expected to be converted into cash within one year, reported net of accumulated depreciation.

Current Liabilities

Obligations that must be paid within one year, including accounts payable and accrued expenses.

Operating Income (EBIT)

Earnings before interest and taxes; reflects the core business performance of a company.

Net Income

The total profit of a company after all expenses, taxes, and costs have been deducted.

Liquidity Ratios

Ratios that measure a firm's ability to meet short-term obligations.

Debt Management Ratios

Ratios that assess a firm's ability to manage its debt levels.

Profitability Ratios

Ratios that measure the income generated by a business relative to its revenue, assets, or equity.

Market Value Ratios

Ratios that compare a company's market value to its book value.

P/E Ratio

Price-to-Earnings ratio; indicates how much investors are willing to pay for a dollar of earnings.

Beta

A measure of a stock's volatility in relation to the overall market.

Capital Asset Pricing Model (CAPM)

A model that describes the relationship between systematic risk and expected return.

Sharpe Ratio

A measure of risk-adjusted return, calculated as the excess return per unit of risk.

Present Value of Growth Opportunities (PVGO)

The value added to a firm through reinvesting in positive NPV growth opportunities.