finance 3

networking capital current assets minus current liabilities
income statement accounting statement that measures the revenues, expenses, and net income of a firm over a period of time
balance sheet The financial statement that summarizes a firm’s accounting value as of a particular date
Cash flow from assets is defined as: operating cash flow minus the change in net working capital minus net capital spending
Operating cash flow is defined as the cash that a firm generates from its normal business activities
cash flow from assets nearly the same meaning as free cash flow
cash flow to creditors defined as interest paid minus net new borrowing
cash flow to stockholders is defined as dividends paid minus net new equity raised
net working capital increases when inventory is sold at a profit
net working capital decreases when a dividend is paid to current shareholders
highly liquid assets can be sold quickly at close to full value
financial leverage increases the potential return to the stockholders
net income increases when revenue increases
common-size financial statements present all balance sheet account values as a percentage of total assets
maximum growth rate that a firm can achieve without any additional external financing internal growth rate
A firm has a current ratio of 1.4 and a quick ratio of .9. Given this, you know for certain that the firm has positive net working capital
the cash ratio is used to evaluate the relationship between the firm’s cash balance and its current liabilities
true about price-earning (PE) ratio a high PE ratio may indicate that a firm is expected to grow significantly
financial statement analysis provides useful information that can serve as a basis for forecasting future performance
the present value of a lump sum future amount: increases as the interest rate decreases
interest rate used to compute the present value of a future cash flow discount rate
Katlyn needs to invest $5,318 today in order for her savings account to be worth $8,000 six years from now. Which one of the following terms refers to the $5,318? present value
Marcos is investing $5 today at 7 percent interest so he can have $35 later. This $35 is referred to as the: future value

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