ADVENTIS FMC 1 GUIDE WITH 100% CORRECT ANSWERS

Income Statement Results of operations (profitability) over time. Shows investors if the company made or lost money over the period Revenue (Sales) Amount charged for the delivery of goods or services Brainpower Read More Previous Play Next Rewind 10 seconds Move forward 10 seconds Unmute 0:05 / 0:15 Full screen Cost of Sales (COGS) Direct cost of producing revenue (raw materials, direct wages, etc.) Gross Profit Revenue - COGS. How efficient are labor and supplies in production process? Operating Expenses All other expenses required to run the business (management salaries, marketing, travel) Non-Operating Expenses Not related to regular business of the company (interest expense, restructuring expense, etc.) Corporate Taxes Local and federal income taxes incurred by the company Net Income (Net Earnings) Revenue - all expenses. Indicated increase in shareholders' value resulting from operations Balance Sheet Organization's financial position at a specific point in time. Discloses resources (assets) and claims to resources (L+E) Cash Current assets comprising currency equivalents that can be accessed immediately Accounts Receivable Amount owed to an organization from the sale of its products or services Fixed Assets Value of assets and property that cannot easily be converted to cash and has a useful life of greater than 1 year (PP&E) Accounts Payable Amount owed to an organization's vendors Debt Amount of obligations owed to creditors Equity Cumulative shareholder investment plus cumulative net income Working Capital Non-cash current assets - non-debt current liabilities Measure of a company's efficiency and short-term health Increase = subtract from CFS. Decrease = add back Debt vs. Equity Debt is less expensive, and less risky. Debt-holders have priority claims on a company's assets is company goes bankrupt Equity is more expensive, not guaranteed to get investment back if company goes bankrupt. Equity requires a higher rate of return to mitigate risk Net Debt Total debt - cash If cash were used to pay down debt Primarily used in credit analysis, as creditors assume a company's cash balance could be applied to debt repayment in the event of a liquidity crunch or bankruptcy Cash Flow Statement Sows how much cash is generated or lost during a period of time Cash from Operating Activities Cash generated by an organization's normal business operations (net earnings, dep and amort, change in working capital) Cash from Investing Activities Related to the acquisition and disposal of a company's long-term investments, including PP&E and M&A (CapEx and acquisitions) Cash from Financing Activities Cash flow between an organization and its owners and creditors (debt and equity issuances and repayments, dividends, and share repurchases) Beginning Cash Balance Ending cash balance for the previous period of time Change in Cash CFO + CFI + CFF Ending Cash Balance Resulting cash balance for the selected period of time and should be reflected on the balance sheet) Depreciation & Amortization Allocating the cost of an asset over its useful life for accounting and tax purposes. Source of cash on the CFS (no cash exchanged) Capital Expenditures Funds used by a company to purchase or upgrade physical assets such as PP&E Change in Working Capital Impact to cash resulting from all non-cash current assets accounts and all non-debt current liability accounts. Decrease = source of cash, positive on CFS. Increase = use of cash, negative on CFS Share Repurchases Reacquisition by an organization of its own stock Remaining shareholders have a higher ownership percentage. An irregular form of returning capital to shareholders Dividends Distribution of cash to current shareholders. Change in Debt Represents any debt issuances or repayments EBITDA Earnings before interest, taxes, depreciation, and amortization. Indication of current operational profitability. Allows for a comparison of profitability between companies in a wide range of industries. Excludes affects from different forms of financing, different political and tax jurisdictions, and different rules around the D&A of assets Free Cash Flow Cash flow from operation - capex Way of looking at a company's cash flow to see what is available for distribution to creditors and shareholders Liquidity Ratios Indicate a company's ability to meet its short-term financial obligations. Of interest to banks and other traditional lending institutions Current Ratio Current assets / current liabilities Indicated whether a company's short-term assets are readily available to pay off its short-term liabilities Decimal value (normal = b/w 1.50 and 3.00) Cash Ratio Total cash / current liabilities Indicates a company's ability to use cash to pay off its current liabilities Decimal value ( normal = b/w 0.20 and 1.00) Efficiency Ratios Indicate how effectively a company utilizes its assets. Days Receivable Accounts receivable / annual revenue * 365 Average number of days an invoice is in accounts receivable before collection Decimal form. 60.0 = company's invoices are on average paid down in 60 days Asset Turnover Total revenue / total assets Amounts of revenues generated per dollar of assets; measures the efficiency of a company's use of its assets in generating sales revenue Decimal format. 2.50 means that for every dollar of assets, the company generated $2.50 in revenue