408 Ch 2

408 Ch 2 - Chapter 2 2.1 The Balance Sheet A balance sheet...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 2 2.1 The Balance Sheet A balance sheet summarizes a firms assets, liabilities, and equity at a given point in  time.  The difference between total value of the assets and the total value of liabilities is the  shareholder’s equity.  Assets = Liabilities + Shareholder’s equity Net working capital =  the difference between a firm’s current assets and its current  liabilities.  Liquidity   refers to the speed at which an asset can be converted to cash.  Must consider: ease of conversion versus loss of value The more liquid a business is, the less likely it is to experience financial distress.  Liquid assets are generally less profitable to hold.  Debt vs. Equity Equity holders are only entitled to the residual value, the portion left after creditors are  paid.  Financial leverage increases potential rewards to shareholders, but it also increase the  potential for financial distress and business failure. 2.2 Income Statement
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/23/2012 for the course BUSI 408 taught by Professor Croce during the Spring '08 term at UNC.

Page1 / 3

408 Ch 2 - Chapter 2 2.1 The Balance Sheet A balance sheet...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online