FIN 301 Lecture 1

Balance Sheet Identity

Assets = Liabilities + Shareholder’s Equity

Balance Sheet Identity Alternate

Shareholder’s Equity = Assets - Liabilities

Net Working Capital Formula

NWC = Current Assets - Current Liabilities

Total Liability formula

TL =

Balanace Sheet

Snapshot of company’s financial condition at a given time

Income Statement

Financial Activity of a company over a period of time (quarter

Income Statement Equation

Income = Revenues - Expenses

Earnings Per Share

EPS = Net Income / Total Shares Outstanding

Price to Earnings Ratio

PE = Stock Price / EPS

Revenue (Sales)

Funds earned from selling a product or providing a service

Gross Profit

Net Sales (after deducting returns and allowances) minus the cost of production

Net Sale Formula

Revenue - Discount - Allowance

Gross Profit Formula

Net Sale - Cost of Goods Sold

Operating Income (EBIT) formula

GP - Operating Cost

EBT formula

EBIT - Interest

Net Income formula

EBT * (1-Tax)

Retained Earnings Formula

Net Income - Dividends

EBIT Alternate Formula

Net Sales - Cost of Goods Sold - Depreciation

GAAP

Generally Accepted Accounting Principles

Average Tax Rate Formula

Total Taxes Paid / Total Taxable Income

Marginal Tax Rate Formula

Amount of tax payable on the next dollar earned

Ennding Cash Balance Formula

Beginning Cash Balance + Net Increase in Cash

Net Increase in Cash Formula

Operating Cash Flow + Investing Cash Flow + Financing Cash Flow

Sources of Cash Flow

Selling Products, Assets, or Issuing