Finance Exam #1 Chapter 2

Chapter 2

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Side ASide B
A financial statement that  reflects a firm’s accounting value on a particular date
Balance Sheet
An asset that normally converts into cash within one year
Current Asset
An asset with a relatively long life
Fixed Asset
A fixed asset with a physical existence
Tangible Asset
A fixed asset that has no physical existence
Intangible Asset
the residual value of a corporation after all debts have been paid
Shareholders Equity
difference between a firm’s current assets and its current liabilities
Net Working Captial
ease and speed with which an asset can be converted to cash
a common set of procedures and standards for preparing audited financial statements
Generally Accepted Accounting Principles
reflects a firm’s performance over a period of time
Income Statement
amount of net income attributable to each share of stock
Earnings Per Share
an expense charged against revenues that does not affect the cash flow of a firm
Noncash Items
total tax paid divided by the total taxable income
Average Tax Rate
amount of tax payable on the next taxable dollar earned
Marginal Tax Rate
The cash generated from a firm’s normal business activities is referred to as the
Operating Cashflow
cash available to distribute to the creditors and to the stockholders
Cash Flow from Assets
The net amount of a firm’s cash flows that are spent on fixed assets is called
Net Capital Spending
cash flow from assets
Free Cash Flow
interest paid minus net new borrowing
Cash Flow to Creditors
The amount of the dividends paid minus the net new equity raised is called the
Cash Flow to Stockholders 

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