Finance 3403 Chapter 2 - Chapter 2 Financial Statements Taxes and Cash Flow 2.1 The Balance Sheet Assets The Left-Hand Side(see below Liabilities and

Finance 3403 Chapter 2 - Chapter 2 Financial Statements...

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Chapter 2Financial Statements, Taxes, and Cash Flow2.1The Balance SheetAssets: The Left-Hand Side (see below)Liabilities and Owners’ Equity: The Right-Hand Side (see below)Net Working Capital= Current Assets – Current LiabilitiesThe difference between a firm’s current assets and its current liabilities.Balance StatementASSETSLIABILITIES AND SHAREHOLDERS EQUITYShort term:CashCurrent Liab:A/P(or current)A/RNotes PayableInventoryTtl Current:Total Current Assets:Long term DebtLong term (fixed):Real Assets(PropertyPlantEquipment)ShareholdersCommon StockEquity:Additional Paid-in capitalIntangible A.(CopyrightsRetained EarningsTrademarkPatents)TOTAL ASSETS=TOTAL LIAB’S & SENotes:Assets listed in order of Decreasing LiquidityHigh Liquidity:Conversion to cash… now (time)!Increasing liquidity appliesto Asset Side.BS:Snap Shot (End of year)Book Value (recorded historically) vs. Market Value (Investor perception!)What waspaid, etc (past tense)IMPORTANT IDENTIY; TOTAL ASSETS = TOTAL LIAB’S + SHAREHOLDER EQUITY
Liquidity:

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