Financial Statements, Taxes & Cash Flow

What is Amortization in accounting?

The process of deducting costs associated with an intangible capital asset over a length of time.

What does Net Cash Flow (NCF) measure?

It measures multiple cash inflows into a company over a set length of time.

What is a Balance Sheet?

A financial statement that lists a company's accounts for liabilities, assets, and owner's equity, showing the balances of these accounts.

What is the Balance Sheet Equation?

Assets = liabilities + owner's equity.

What does Revenue refer to?

The total amount of money a company acquires over the length of an accounting period.

What is Positive Cash Flow?

A condition where businesses bring in more cash than they lose.

What does EBIT stand for and signify?

Earnings Before Interest and Taxes; it is the revenue left after deducting costs associated with production, general expenses, administration, and selling.

What is Negative Cash Flow?

A type of cash flow that occurs when a business loses more money than it brings in.

What are Generally Accepted Accounting Principles (GAAP)?

A set of standards that govern how financial statements, including the balance sheet, are reported.

What is Free Cash Flow (FCF)?

The amount of money a company makes after removing expenses for capital expenditures.

What is the formula for Free Cash Flow (FCF)?

Operating cash flow - capital expenditures.

What is Operating Cash Flow (OCF)?

A measure of how well a company can use its core business activities to generate positive cash flow.

What is Net Income?

A term used to describe when a company's revenue exceeds its expenses in an accounting period.

What are Liabilities on a Balance Sheet?

Obligations that a business owes, which must be reported on the financial statement.

What is the formula for Net Cash Flow (NCF)?

Operating cash flow + cash flow that comes from investments + cash flow associated with financing.

What is Depreciation?

An accounting process for deducting the costs of tangible capital assets.

What are Capital Expenditures?

Costs associated with the purchase of equipment, machinery, and buildings by a business.

What does Assets refer to on a Balance Sheet?

Things of value owned by a company, such as equipment or land.

What is the formula for Operating Cash Flow (OCF)?

Earnings before taxes and interest + amortization + depreciation - taxes.

What does the Balance Sheet Equation represent?

It states that a company's assets must equal the owner's equity plus liabilities; discrepancies indicate an error in calculation.