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Chapter 2 Understanding Financial Statements, Taxes, and Cash Flows

Chapter 2 Understanding Financial Statements, Taxes, and Cash Flows

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Chapter 2 - Understanding Financial Statements, Taxes, and Cash Flows Income Statement SALES (revenue)-EXPENSES ( Cost of Goods Sold , Operating Expenses (marketing, administrative) , Financing Costs , Taxes )= PROFIT SALES - Cost of Goods Sold GROSS PROFIT - Operating Expenses OPERATING INCOME (EBIT) - Interest Expense EARNINGS BEFORE TAXES (EBT) - Income Taxes EARNINGS AFTER TAXES (EAT) - Preferred Stock Dividends - NET INCOME AVAILABLE TO COMMON STOCKHOLDERS Total Assets =Outstanding Debt + Shareholders’ Equity Assets Current Assets : assets that are relatively liquid, and are expected to be converted to cash within a year. Cash, marketable securities, accounts receivable, inventories, prepaid expenses. Fixed Assets : machinery and equipment, buildings, and land. Other Assets : any asset that is not a current asset or fixed asset. Intangible assets , such as patents and copyrights. Financing Debt Capital: financing provided by a creditor.
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