UNC BUSI 408 Midterm
- when the earnings process is virtually completed
according to GAAP, when is revenue
- when the value of an exchange of goods/services is known or reliably
recognized on an income statement?
determined
left hand side
assets
- listed in order of decreasing liquidity
average tax rate total taxes/total taxable income
financial statement showing a firm's account value on a particular date
balance sheet
- organizes and summarizes a firm's assets + liabilities + equity
balance sheet identity assets = liabilities + stockholders' equity
also known as "historical cost"
book value - what was paid for them
- values shown on balance sheet & generally not what they're worth
cash flow difference between the cash that come in and went out
cash flow from assets = cash flow to creditors + cash flow to stockholders
cash flow refers to difference between cash in and cash out
cash flow to creditors = interest paid - net new borrowing
cash flow to stockholders = dividends paid - net new equity paid
, UNC BUSI 408 Midterm
< 1 year life
current assets
ex. inventory, cash, accounts receivable
financial leverage
debt =
more debt = more financial leverage
The December 31, 2021, balance sheet $639,000
of Chen, Incorporated, showed long-
term debt of $1,450,000, $150,000 in the
common stock account, and $2,750,000
in the additional paid-in surplus
account. The December 31, 2022,
balance sheet showed long-term debt
of $1,680,000, $160,000 in the common
stock account and $3,050,000 in the
additional paid-in surplus account. The
2022 income statement showed an
interest expense of $99,000 and the
company paid out $155,000 in cash
dividends during 2022. The firm's net
capital spending for 2022 was
$1,060,000, and the firm reduced its net
working capital investment by $135,000.
What was the firm's 2022 operating cash
flow, or OCF?
- when the earnings process is virtually completed
according to GAAP, when is revenue
- when the value of an exchange of goods/services is known or reliably
recognized on an income statement?
determined
left hand side
assets
- listed in order of decreasing liquidity
average tax rate total taxes/total taxable income
financial statement showing a firm's account value on a particular date
balance sheet
- organizes and summarizes a firm's assets + liabilities + equity
balance sheet identity assets = liabilities + stockholders' equity
also known as "historical cost"
book value - what was paid for them
- values shown on balance sheet & generally not what they're worth
cash flow difference between the cash that come in and went out
cash flow from assets = cash flow to creditors + cash flow to stockholders
cash flow refers to difference between cash in and cash out
cash flow to creditors = interest paid - net new borrowing
cash flow to stockholders = dividends paid - net new equity paid
, UNC BUSI 408 Midterm
< 1 year life
current assets
ex. inventory, cash, accounts receivable
financial leverage
debt =
more debt = more financial leverage
The December 31, 2021, balance sheet $639,000
of Chen, Incorporated, showed long-
term debt of $1,450,000, $150,000 in the
common stock account, and $2,750,000
in the additional paid-in surplus
account. The December 31, 2022,
balance sheet showed long-term debt
of $1,680,000, $160,000 in the common
stock account and $3,050,000 in the
additional paid-in surplus account. The
2022 income statement showed an
interest expense of $99,000 and the
company paid out $155,000 in cash
dividends during 2022. The firm's net
capital spending for 2022 was
$1,060,000, and the firm reduced its net
working capital investment by $135,000.
What was the firm's 2022 operating cash
flow, or OCF?
