Finance 2
what is depreciation
a systematic expensing of an asset based on the assets estimated life
a balance sheet reflects a firms
accounting value on a specific date economic value at a specific time
net earnings refers to income earned
after tax and interest
Balance sheet equation
assets equal liabilities plus stockholders equity
liquidity refers to the ease of changing
assets to cash
the short run is a period when there are ___ cost
both fixed and variable
what are components of cash flows from assets
change in new working capital operating cash flow capital spending
assets can be classified as
current and fixed tangible and intangible
non-cash items are ____ that____ cash flow
expenses; dont directly affect
marginal tax rates are the most important because
financial decisions are based on new cash flows incremental tax flows are taxed at marginal tax rates
what is NOT a component of cash flow from assets
financing expenses
deprecation is the accountants estimate of the cost of ___ used in the production process matched with the benefits produced from owning it
fixed assets equipment
under GAAP, assets are generally carried on a firms balance sheet at
historical value book value
what questions can be answered from reviewing a firms balance sheet
how much debt is used to finance the firm what is the total amount of assets the firm owns
who is entitled to the residual value of a firms cash flows
shareholders
the more debt a firm has
the greater the financial leverage
When is revenue recognized on the balance sheet
when the earning process is virtually completed when the exchange of goods and services is completed