Quizlet-ch2 definitions PDF

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Finance Applications and Theory 4th Edition Ch. 2 Study online at quizlet.com/_3mwon7 1.

Average Tax Rate

The percentage of each dollar of taxable income that the firm pays in taxes

2.

Balance Sheet

The financial statement that reports a firm's assets liabilities, and equity at a particular point in time

Book (or Historical Cost) Value

The amount the firm paid for the assets

4.

Capital Structure

The amount of debt versus equity financing held on the balance sheet

5.

Cash Flow from Financing Activities

Cash flows that result from debt and equity financing transactions

Cash Flows from Investing Activities

Cash flows associated with the purchase or sale of fixed or other long-term assets

Cash Flows from Operations

Cash flows that are the direct result of the production and sale of the firm's products

8.

Common Stock and Paid-In Surplus

The fundamental ownership claim in a public or private company

9.

Current Assets

Assets that will normally convert to cash within one year

Current Liabilities

Obligations of the firm that are due within one year

Earnings Management

The process of controlling a firm's earnings

3.

6.

7.

10.

11.

20.

Income Statement

Financial statement that reports the total revenues and expenses over a specific period of time

21.

Liabilities

Funds provided bu lenders to the firm

22.

Liquidity

The ease with which an asset can be converted into cash

23.

Long-Term Debt

Obligations of the firm that are due in the more than one year

24.

Marginal Tax Rate

The amount of additional taxes a firm must pay out for every additional dollar of taxable income it earns

25.

Marketable Securities

Short-term, low-rate investment securities held by the firm for liquidity purposes

26.

Market Value

The amount the firm would get if it sold the assets

27.

Net Change in Cash and Marketable Securities

The sum of the cash flows from operations, investing activities, and financing activities

28.

Net Income

The bottom line on the income statement

29.

Net Operating Profit After Taxes (NOPAT)

Net profit a firm earns after taxes but before any financing costs

30.

Net Working Capital

The difference between a firm's current assets and current liabilities

31.

Preferred Stock

A hybrid security that has characteristics of both long-term debt and common stock

32.

Retained Earnings

The portion of company profits that are kept by the company rather than distributed to the stockholders as cash dividends

33.

SarbanesOxley Act of 2002

Requires that firm;s senior management must sign off on the financial statements of the firm, certifying the statements as accurate and representative of the firm's financial condition during the period covered

12.

EBIT

Earnings before interest and taxes

13.

EBITDA

Earnings before interest, taxes, depreciation, and amortization

14.

EBT

Earnings before taxes

15.

Financial Leverage

The extent to which debt securities are used by a firm

16.

Financial Statement

Statement that provides an accounting-based picture of a firm's financial condition

34.

Statement of Cash Flows

Financial statement that shows the firm's cash flows over a period of time

17.

Fixed Assets

Assets with a useful life exceeding one year

35.

18.

Free Cash Flows

The cash that is actually available for distribution to the investors in the firm after the investments that are necessary to sustain the firm's ongoing operations are made

Statement of Retained Earnings

Financial statement that reconciles net income earned during a given period and any cash dividends paid with the change in retained earnings over the period

36.

Stockholders' Equity

Funds provided by the firm;s preferred and common stock owners

19.

Gross Profit

Net sales minus cost of goods sold...