Finance 300

Securities and Exchange Commission (SEC) Federal regulatory body governing the sale and listing of securities.
Stockholders Annual Report must include: Income statement, balance sheet, statement of retained earnings, & statement of cash flows
Current asset Short term assets, expected to be converted into ash within a year or less
Gross Profit The amount of profits remaining to satisfy operating, financial, and tax costs.
Sales Revenue- COGS Gross Profit
Statement of Cash Flows Provides a summary of the firm’s operating, investment, and financing cash flows and reconciles them with changes in its cash and marketable securities during the period.
Cross-sectional Analysis Involves the compassion of different firms financial ratios at the same point in time; involves comparing the firms ratio to those of other firms in its industry or to industry averages.
Time Series Analysis Evaluation of the firm’s financial performance over time using financial ratio analysis
Average Collection Period The amount of time needed to collect accounts receivable. Useful in evaluating credit and collection policies
Debt Ratio Measures the proportion of total assets financed by the firm’s creditors
Common size income statement Income statement in which each item is expressed as a percentage of sales (divided by sales)
Price Per Earnings Ratio Measures the amount that investors are willing to pay for each dollar of a firm’s earnings, the higher the P/E ratio, the greater the investors confidence
Modified Accelerated Cost Recovery System (MARCS) System used to determine the depreciation of assets for TAX purposes.
Financial managers Want to depreciate an asset now rather than later
Operating Cash Flows (OCF) Cash a firm generates through its normal operation – producing or selling its outputs of goods or services; calculated as net operating profit after tax (NOPAT) plus depreciation
Operating flows Cash flows DIRECTLY related to sale and production of the firm’s products and services
Investment flows Cash flows associated with purchase and sale of both fixed assets and equity investments in the other firms
Financing flows Cash flow that results from debt and equity financing transactions; include incurrence and repayment of debt, cash inflow from the sale of stock, and cash outflows to purchase sock or to pay cash dividends.
Long term (Strategic) Financial Planning Plans that lay out a company’s planned financial actions and the anticipated impact of those actions over periods ranging from 2-10 years
Key input of short term (operating) financial planning The sales forecast which is what it begins with and various forms of operating and financial data
Final sales forecast A function of providing sales expectations, and the external data provide a means of adjusting these expectations to take into account the general economic factors
% of sales method Method for developing the pro forma income statement; it forecasts sales and then expresses the various income statement items as a percent of projected sales.

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