CORPORATE FINANCE STUDY GUIDE #3
Financial Management Decisions - correct answer -Investment Decisions
-Financing Decisions
-Payout Policy
Cash Method of Accounting - correct answer Income is counted when cash is actually
received, and expenses are counted when actually paid
Accrual Method of Accounting - correct answer Income is recorded when the sale
occurs, and expenses are recorded when the good/service is received
Multi-Step Income Statement - correct answer Net Sales
-COGS
=Gross Profit
-Depreciation Expense
-Operating Expense
=Operating Profit (EBIT)
-Interest Expense
=Income Before Taxes (EBT)
-Tax Expenses
=Net Income
Operating Expenses - correct answer -SG&A
-R&D
Depreciation Methods - correct answer -Straight Line (same rate each year)
-Accelerated Cost Recovery Method (good for tax purposes)
Non-Operating Expenses (Income) - correct answer -Dividend Income
-Rental Income
-Interest Expense (Cost of Borrowing)
EPS - correct answer Net Income / # Shares Outstanding
Balance Sheet - correct answer Assets
Current Assets
Cash
A/R
Allowance for Doubtful Accounts
Inventories
Fixed Assets/PPE
Accumulated Depreciation
Liabilities
Current Liabilities
, A/P
Accrued Expenses
Notes Payable
Current Portion of LTD
Long-Term Debt
Equity
Common Stock (@ Par)
APIC
Preferred Stock
Retained Earnings
Key Equation - correct answer Total Assets = Liabilities + Equity
Statement of Cash Flows - correct answer Net Income
+Depreciation Expense
-ΔI/S Assets
+ΔI/S Liabilities
= CFO
-δgross Fixed Assets (PPE)
=CFI
+δnotes Payable
+ΔLTD
+ΔC/S & APIC
-Dividends Paid
=CFF
Net Δ Cash
Cash at BOP
Cash at EOP
Common Size Balance Sheet - correct answer % of Total Assets
Common Size Income Statement - correct answer % of Net Sales
TAT (Operating Ratio) - correct answer Sales / Total Assets
ROA (Operating Ratio) - correct answer Net Income / Total Assets
ROE (Operating Ratio) - correct answer Net Income / Total Equity
% Gross Margin (Profitability Ratio) - correct answer (Net Sales - COGS) / Net Sales
Operating Margin (Profitability Ratio) - correct answer Operating Income / Net Sales
Financial Management Decisions - correct answer -Investment Decisions
-Financing Decisions
-Payout Policy
Cash Method of Accounting - correct answer Income is counted when cash is actually
received, and expenses are counted when actually paid
Accrual Method of Accounting - correct answer Income is recorded when the sale
occurs, and expenses are recorded when the good/service is received
Multi-Step Income Statement - correct answer Net Sales
-COGS
=Gross Profit
-Depreciation Expense
-Operating Expense
=Operating Profit (EBIT)
-Interest Expense
=Income Before Taxes (EBT)
-Tax Expenses
=Net Income
Operating Expenses - correct answer -SG&A
-R&D
Depreciation Methods - correct answer -Straight Line (same rate each year)
-Accelerated Cost Recovery Method (good for tax purposes)
Non-Operating Expenses (Income) - correct answer -Dividend Income
-Rental Income
-Interest Expense (Cost of Borrowing)
EPS - correct answer Net Income / # Shares Outstanding
Balance Sheet - correct answer Assets
Current Assets
Cash
A/R
Allowance for Doubtful Accounts
Inventories
Fixed Assets/PPE
Accumulated Depreciation
Liabilities
Current Liabilities
, A/P
Accrued Expenses
Notes Payable
Current Portion of LTD
Long-Term Debt
Equity
Common Stock (@ Par)
APIC
Preferred Stock
Retained Earnings
Key Equation - correct answer Total Assets = Liabilities + Equity
Statement of Cash Flows - correct answer Net Income
+Depreciation Expense
-ΔI/S Assets
+ΔI/S Liabilities
= CFO
-δgross Fixed Assets (PPE)
=CFI
+δnotes Payable
+ΔLTD
+ΔC/S & APIC
-Dividends Paid
=CFF
Net Δ Cash
Cash at BOP
Cash at EOP
Common Size Balance Sheet - correct answer % of Total Assets
Common Size Income Statement - correct answer % of Net Sales
TAT (Operating Ratio) - correct answer Sales / Total Assets
ROA (Operating Ratio) - correct answer Net Income / Total Assets
ROE (Operating Ratio) - correct answer Net Income / Total Equity
% Gross Margin (Profitability Ratio) - correct answer (Net Sales - COGS) / Net Sales
Operating Margin (Profitability Ratio) - correct answer Operating Income / Net Sales
