Chapter 2: Financial Statements, taxes and cash flow
According to GAAP, when is revenue recognized on an income statement?
-when the value of an exchange of goods or services is known or reliably determined -when the earnings process is virtually completed
U.S. corporations pay tax at a rate of:
21%
Book Value
The balance sheet value of the assets, liabilities, and equity
Market Value
True value; the price at which the assets, liabilities, or equity can actually be bought or sold
Shareholders' equity is best defined as:
the residual value of a firm.
A balance sheet reflects a firm's
accounting value on a specific date
Free cash flow is also known as:
cash flow from assets
Current assets are defined as assets that can be turned into cash within ______ months.
12
In the long-run, costs may be considered as ________.
All variable
The short run involves:
Both fixed and variable costs
When a firm smooths earnings to please investors, it is called
Earnings management
The more debt a firm has, the greater its:
degree of financial leverage
