FIN 3320 Financial Statements

Dr. Bobby Merriman Finance 3320 Financial Statements

financial statement

formal records of the financial activities and position of a business

Securities and Exchange Commission (SEC)

a government agency responsible for protecting investors by ensuring the integrity of the capital markets in the United States

Financial Accounting Standards Board (FASB)

an organization that establishes financial accounting and reporting standards in the U.S.

Generally Accepted Accounting Principles (GAAP)

a set of rules and guidelines for financial accounting in the U.S.

EDGAR

an electronic system where company's submit documents required by the SEC and is also the plae where investors can view these required files

annual report

comprehensive report on a company's activities and financial performance throughout the preceding year

10-K

an annual report filed by a publicly traded company with the SEC, detailing its financial performance, including their financial statements and other disclosures

10-Q

a quarterly report filed by a publicly traded company with the SEC, detailing its financial performance, including their financial statements and other disclosures

balance sheet

a list of what a company owns and owes at a single point in time; a list of what a company bought and how they bought it; a list of a company's assets, liabilities, and equity at a single point in time

assets

resources owned by a company that are expected to bring future economic benefits

liabilities

obligations owed by a company that are expected to result in future economic outflows

equity

the value of shares issued by the company; the amount of money that would be returned to a company's shareholders if all of the assets were liquidated and all of the company's debt was paid off in the case of liquidation

current asset

assets that are expected to be converted to cash within the next year

non current asset

assets that are not expected to be converted to cash within the next year

current liability

obligation that is due within one year

non current liability

obligation that is due after one year

cash and cash equivalent

money in the bank or short-term investments that can quickly be sold for cash or which mature in three months or less

accounts receivable

amounts owed to a company by customers for goods or services delivered but not yet paid

marketable security

investments in stock or bonds that can be traded if needed (i.e. it is marketable)

inventory

products and materials yet to be sold, including raw materials, work in progress, and finished goods

property, plant, and equipment (PP&E)

long-term buildings or machinery used to make products or provide services

operating lease

rental agreements for buildings or machinery; an agreement that allows a company to use an asset for a specified period without ownership

intangible asset

an asset that does not have any physical existence, but has economic value to the business (e.g. patents, trademarks, and copyrights)

goodwill

the dollar amount paid above book value when acquiring another company

account payable

amounts a company owes to suppliers for goods or services received but not yet paid for

short term debt

borrowed money that needs to be paid back within one year

long term debt

borrowed money that needs to be paid back after one year

common stock

a security representing ownership in a company, giving holders a share in the company's profits and the right to vote about the company's business activities

Treasury stock

shares that were issued and later repurchased by the company from the shareholders

retained earnings

the sum of a company's net income from prior periods, after deducting any dividends paid to the company's shareholders

income statement

a list of a company's revenue, expenses, and profit over a period of time

variable cost

a type of expense that changes in proportion to how much a company sells or produces; in business, usually estimated by cost of goods sold

fixed cost

a type of expense that remains the same regardless of the number of products sold or produced; in business, usually estimated by operating expenses

revenue

the money generated from normal business operations (also called sales)

cost of goods sold

the direct costs attributable to the production of goods sold by the company (also called cost of sales)

gross profit

a measure of profit calculated as revenue minus cost of goods sold

operating expense

expenses a business incurs through its normal business operations that are not directly related to production

research and development (R&D)

activities a company undertakes to innovate and introduce new products and services or to improve existing ones

selling, general, and administrative (SG&A)

expenses that are not directly tied to the production of goods or services

depreciation

an accounting method used to allocate the cost of a tangible asset over its useful life

operating profit

profit from business operations excluding interest, taxes, and non-traditional sources of revenue (also called operating income)

interest expense

the cost of borrowing money

net income

total profit of a company after all expenses have been deducted from all sources of income

earnings per share (EPS)

how much money a company makes for each outstanding share of common stock, calculated as net income divided by the number of shares outstanding

cash flow statement

a list of the cash inflows and cash outflows from a company's operating, investing, and financing activities over a period of time

cash inflow

money received by a company from its various activities

cash outflow

money spent by a company from its various activities

accrual accounting

an accounting method where revenues and expenses are recorded when a transaction occurs, regardless of when cash is exchanged

cash accounting

an accounting method where revenues and expenses are recorded when cash is received or paid

operating activities

company activities directly related to operating the business and generating revenues

investing activities

company activities related to the purchase and sale of long-term assets and other investments

financing activities

company activities related to how money is raised by and paid to lenders and owners of the company

cash flow from operating activities

cash generated or spent in the course of routine, day-to-day operations

cash flow from investing activities

cash generated or spent through investment activities

cash flow from financing activities

cash generated or spent through financing activities

non-cash expense

expenses that do not involve actual cash outflows but which occur due to accrual accounting

non-cash change in working capital

adjustments to working capital that do not involve cash transactions but which occur due to accrual accounting

working capital

the difference between a company's current assets and current liabilities, representing the short-term liquidity available for day-to-day operations

capital expenditures (CAPEX)

money spent by a business to acquire assets that are expected to generate more money in the future

merger and acquisition (M&A)

the process of combining or consolidating companies or assets into one company

issuing equity

the process by which a company raises capital by selling shares of the company to investors through the sale of stock

issuing debt

the process by which a company raises capital by borrowing money from investors through the sale of bonds

repaying debt

cash spent to pay back borrowed funds to lenders

stock buybacks

cash spent from company earnings to buy shares of its own stock from shareholders, reducing the number of shares outstanding

dividends

a portion of a company's earnings paid out to shareholders