Module 4 Business

The Income Statement contains

revenues and expenses

The Balance Sheet contains

assets and liabilities

Which website do companies file their 10k

securities and exchange commission (SEC)

What is depreciation 

assets loss of value over time

EBITDA stands for…

earnings before interest, taxes, depreciation, and amortization

What does COGS stand for

cost of goods sold

Accounting Equation

Assets = Liabilities + Shareholders’ Equity

Income statement

revenue earned and expenses incurred

Cash flow statement

Provides information about a company’s liquidity and cash position

Two important liquidity ratios

• Current ratio

• Quick ratio

Current ratio equation

Current assets / current liabilities 

Quick ratio equation

(Current assets - inventories) / Current liabilities

Two important solvency ratios:

• Debt-to-Equity ratio

• Interest coverage ratio

Debt-to-Equity Ratio

Total debt / total equity

Interest Coverage Ratio

EBIT / interest expense

EBITDA Equation

Gross profit - operating expenses 

Three important profitability ratios

• Gross profit margin

• Net profit margin

• Return on equity (ROE)

Gross Profit Margin

Gross profit / revenue

Net profit margin

Net income / revenue

Return on equity (ROE)

Net income / total shareholders equity