chap 2 - Chapter 2 Balance Sheet (BS) - snapshot of firm at...

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Chapter 2 Balance Sheet (BS ) - snapshot of firm at a particular point in time Assets - on the left hand side (LHS) – divided into current assets, fixed assets - listed in order of liquidity: how easy is it to convert cash without losing value? - Current assets are listed before fixed assets, cash is most liquid; Accounts receivable (money owed to the firm by its customers) Liabilities and owners equity (RHS) - firm’s debt and ownership, current vs. long term; Liabilities listed 1 st on RHS, current before long term liabilities (order of time to maturity) - Current liabilities – Accounts payable (money the firm owes to its suppliers) - Long term – a debt that’s not due in the coming year; ex. Loan that firm will pay over the next 5 years - LHS balances (=) with RHS: Assets= Liabilities + Owners Equity - This equation can be rearranged to prove that owners equity = Assets – Liabilities - 1 interpretation of Owners Equity is what is left of the firm after all debts are paid Financial management decisions are typically either investment decisions or financing
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chap 2 - Chapter 2 Balance Sheet (BS) - snapshot of firm at...

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