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Chapter 3 Test 1 Outline

Chapter 3 Test 1 Outline - Chapter 3 Finance 302 Test#1...

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Chapter 3 – Finance 302 Test #1 Outline Balance Sheet Balance Sheet – is a summary document of the firm’s financial position at a given point in time (a snapshot of the firm’s position as a specific point in time). a. Assets = Liabilities + Capital b. The left side of the statement shows the assets that the company owns, while the right side shows the firm’s liabilities and stockholders’ equity, which are claims against the firm’s assets. Format of Balance Sheet: Assets: Current Assets – expected to be converted into cash within a year (short term assets). 1. Cash + Cash Equivalent Liquid, Short term investments – represents actual spendable money (ex: marketable securities) 2. Accounts Receivables (amounts owed to a firm by credit customers) – credit sales that have not yet been collected. 3. Inventory – Works in Process and Finished Goods – the cost of raw materials, work in process, and finished goods. Fixed Assets (long term) – not expected to be converted to cash soon (used for more than a year) 1. Net Plant and Equipment – gross plan and equipment (original cost of long term assets) minus accumulated depreciation – the cost of the buildings and equipment used in operations minus the depreciation that has been taken on these assets – non-cash charge; the accumulation of total depreciation since acquisition 2. Other long term assets (some intangible) [intellectual property, copyrights, and patents] TOTAL ASSETS Liabilities – amount owed by the firm. : Current Liabilities – are short term; expected to be paid in a year or less.
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