Ch 2 - 2.1 2.2 2.3 2.4 TheBalanceSheet TheIncomeStatement...

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2.1 The Balance Sheet 2.2 The Income Statement 2.3 Taxes 2.4 Cash Flow 2-1
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The difference between book value and market value The difference between accounting income and cash  flow The difference between average and marginal tax rates How to determine a firm’s cash flow from its financial  statements 2-2
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A snapshot of the firm’s assets and liabilities at  a given point in time  Assets  In order of decreasing liquidity Liabilities and Owners’ Equity In ascending order of when due to be paid Balance Sheet Identity Assets = Liabilities + Stockholders’ Equity 2-3
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Net Working Capital and Shareholders' Equity Total Value of Liabilities Total Value of Assets Current Assets Current Liabilities Long Term Debt Shareholder Equity 1. Tangible Fixed Assets 2. Intangible 2-4
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Net working capital Current Assets minus Current Liabilities Usually positive for a healthy firm Liquidity Speed and ease of conversion to cash without  significant loss of value Valuable in avoiding financial distress Debt versus Equity Shareholders’ equity = Assets - Liabilities 2-5
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2-6
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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.
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This note was uploaded on 11/17/2011 for the course ECONOMICS 103 taught by Professor Tohmass during the Spring '11 term at University of Houston-Victoria.

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Ch 2 - 2.1 2.2 2.3 2.4 TheBalanceSheet TheIncomeStatement...

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