Financial Statements, Taxes, and Cash Flow

These flashcards cover essential vocabulary and key concepts related to financial statements, taxes, and cash flow as outlined in the chapter.

Accounting Value

Also known as 'book' value; it is the value of assets, liabilities, and equity as shown on the company's balance sheet.

Market Value

The true value; the price at which the assets, liabilities, or equity can actually be bought or sold.

Income Statement

A financial statement that measures performance over a specified period, showing revenues and expenses.

Net Income

The final profit figure after all revenues have been deducted for expenses in the income statement.

Balance Sheet

A snapshot of a firm’s assets and liabilities at a specific point in time.

Working Capital

Current assets minus current liabilities, indicating the liquidity of a firm.

Liquidity

The ability to quickly convert assets into cash without significant loss of value.

GAAP

Generally Accepted Accounting Principles; standards for financial reporting.

Marginal Tax Rate

The percent of tax paid on the next dollar earned.

Average Tax Rate

Total taxes paid divided by taxable income.

Cash Flow

The net amount of cash being transferred into and out of a business.

Statement of Cash Flows

A financial report that shows how cash is generated and used in operating, investing, and financing activities.

Operating Cash Flow (OCF)

Cash generated from normal business operations, crucial for assessing financial health.

Net Capital Spending (NCS)

Expenditures on fixed assets, such as property, plant, and equipment.

Changes in Net Working Capital (NWC)

Adjustments in current assets and current liabilities over time, impacting cash flow.

Cash Flow to Creditors

Cash payments made to creditors for interest and repaid principal.

Cash Flow to Stockholders

Dividends paid to shareholders and any repurchases of stock.

Matching Principle

An accounting concept where expenses are recognized in the same period as the revenues they help to generate.

Noncash Items

Expenses that are recognized on the income statement but do not involve actual cash outflow, like depreciation.

Dividend

Payments made to shareholders from a corporation's earnings.

Retained Earnings

The cumulative amount of net income that is retained in the company rather than distributed as dividends.