Master this deck with 66 terms through effective study methods.
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Income statement, balance sheet, and cash flow statement.
It shows a company's revenues and expenses over a specified time period.
Revenue (the 'top line').
Net income (the 'bottom line').
A snapshot of a company's financial position at a specific point in time.
Resources that provide economic utility.
Claims against the company's assets.
Assets = Liabilities + Shareholders' Equity.
Net income is the starting line item in the cash from operations section.
Adjustments for non-cash expenses like depreciation and amortization.
An outflow of cash.
An inflow of cash.
Cash Flow from Operations = Net Income + Depreciation and Amortization - Increase in Working Capital.
It tracks changes in working capital accounts.
Cash outflow for the purchase of property, plant, and equipment (PP&E).
It increases the PP&E account.
It reduces the recorded value of fixed assets (PP&E).
It results in a cash inflow and increases liabilities on the balance sheet.
It results in a cash outflow and reduces retained earnings on the balance sheet.
It flows to the balance sheet as the cash balance for the current period.
Retained Earnings = Beginning Balance + Net Income - Dividends
Capex increases the Ending PP&E Balance.
Depreciation decreases the Ending PP&E Balance.
Through Retained Earnings, which reflects cumulative net earnings minus dividends.
It increases by the portion of net income kept by the company and decreases by dividends issued.
Interest Expense is recorded on the Income Statement and is calculated from debt balances on the Balance Sheet.
Depreciation is a non-cash expense on the Income Statement that reduces the PP&E line item on the Balance Sheet.
Net Income from the Income Statement.
They are added back to net income to reconcile cash flow from operations.
The current period cash balance on the Balance Sheet.
Working capital items can either be a source or use of cash, affecting the Cash Flow Statement.
It links through items that impact cash, such as working capital, financing, and PP&E.
To ensure accurate reporting and to validate the interconnections between the Income Statement, Balance Sheet, and Cash Flow Statement.
AI helps validate links between reports and identify discrepancies for improved accuracy and strategic insight.
It refers to subtracting Capex from the PP&E balance when using the negative sign convention, resulting in a positive increase.
Net income flows into the shareholders' equity account via retained earnings.
It reconciles net income with cash flow by adjusting for non-cash expenses and changes in working capital.
Maintaining consistency across the Income Statement, Balance Sheet, and Cash Flow Statement.
Retained Earnings.
Dividends decrease the Retained Earnings balance.
Cash-funded stock buybacks are recorded as uses of cash in the Cash Flow Statement.
Items that do not involve cash transactions, often included in the cash flow statement.
A non-cash expense representing the cost of employee stock options.
A reduction in the value of inventory, reflecting losses or obsolescence.
A reduction in the value of goodwill on the balance sheet, indicating that the asset is worth less than recorded.
Taxes that are owed or recoverable in future periods due to timing differences in income recognition.
Beginning NWC - Ending NWC.
An outflow of cash, meaning cash is tied up in working capital.
An inflow of cash, meaning cash is released from working capital.
It represents a cash outflow, as cash has not yet been received from customers.
Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings, or equipment.
Depreciation spreads the cost of Capex over the useful life of the asset.
(Capital Expenditures - Residual Value) ÷ Useful Life.
The expected liquidation value of an asset at the end of its useful life.
The estimated number of years an asset will provide economic utility to the company.
Interest Rate (%) × (Beginning Debt + Ending Debt Balance ÷ 2).
A cash inflow from raising capital through debt issuances.
Retained Earnings = Prior Period Balance + Net Income - Dividends.
Through the fundamental accounting equation: Total Assets = Total Liabilities + Total Shareholders Equity.
The cash inflows and outflows from operating, investing, and financing activities.
It reduces the value of PP&E on the balance sheet over time.
It increases the ending cash balance on the balance sheet.
It ensures that expenses are recognized in the same period as the revenues they help to generate.
It represents a cash inflow, as the company is delaying cash payments.
It includes cash transactions for the purchase and sale of physical and financial investments.
It includes cash inflows and outflows related to debt and equity financing.