Overview of Financial Statements

A set of vocabulary flashcards covering key financial concepts and terms related to financial statements, ratios, and modeling.

Financial Statements

A set of three integrated reports: income statement, balance sheet, and cash flow statement.

Income Statement

Presents the results of operations, indicating whether the company made or lost money during a specific period.

Balance Sheet

Shows an organization's financial position at a specific point in time, detailing assets, liabilities, and equity.

Cash Flow Statement

Reflects how much cash is generated or lost during a period, detailing cash from operating, investing, and financing activities.

Net Income

Calculated as revenue less all expenses, it indicates the increase in shareholders' value resulting from operations.

Operating Income

Calculated as revenue less cost of sales and operating expenses, it indicates a company's earning power from ongoing operations.

Working Capital

A measure of a company's efficiency and short-term financial health, calculated as non-cash current assets less non-debt current liabilities.

Debt vs. Equity

Examines the cost and priority of capital; debt is generally less expensive but riskier, while equity is more expensive and less secure.

EBITDA

Earnings Before Interest, Taxes, Depreciation and Amortization; measures operational profitability.

Free Cash Flow

Cash flow available for distribution to creditors and shareholders, typically calculated as cash flow from operations less capital expenditures.

Liquidity Ratios

Indicate a company's ability to meet short-term financial obligations.

Efficiency Ratios

Indicate how effectively a company utilizes its assets.

Profitability Ratios

Provide insight into the profits made by a company relative to its assets, equity, or revenue.

Debt/EBITDA Ratio

Used to assess the probability of a company defaulting on debt.

Market Ratios

Measure investor response to owning a company's stock and evaluate market perception.

Financial Modeling

The practice of forecasting an organization's financial statements to facilitate decision-making and stakeholder communication.

Capital Expenditures (CapEx)

Funds used to purchase or upgrade physical assets like property, plant, and equipment.