POF exam 1

capital budgeting

plan and manage liquid assets

capital structure

ability to raise cash for capital expenditures

working capital management

manage current assets and current liabilities

sole proprietorship

one owner, no distinction between corp and owner

partnership

minimum of 2 owners, general/limited partnership

corporation

own legal entity

accounting equation

Assets = Liabilities + Equity

Liquidity

ability to convert to cash

income statement

records all revenues and expenses according to GAAP

marginal tax rate

tax rate applicable to $1 more of income, more useful than average tax rate

statement of cash flows

depicts details of cash; operating, investing, financing

common size statements

income statement: % of sales

balance sheet: % of total assets

proforma statements

future/projected statements

short term solvency/liquidity

do you have the ability to pay current debt?

long term solvency/liquidity

do you have the ability to pay ALL debt?

asset management/turnover

measuring efficiency of assets to generate income

profitability

more revenues than expenses

average tax rate equation

Average Tax = Total Tax / Tax Income

current ratio equation

current assets / current liabilities

quick ratio

quick assets (cash, receivables, marketable securities) / current liabilities

debt ratio

total liabilities / total assets

TIE ratio

EBIT / Interest

Inventory turnover ratio

COGS / Inventory

days sales in inventory ratio

365 / inventory turnover

profit margin ratio

net income / sales