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