Term
| Accounts Payable - AP - Trade Credit |
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Definition
obligation created when inventory or supplies are purchased on credit from suppliers.
on balance sheet
as a current liability |
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Term
| Accounts Payable Turnover |
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Definition
short term liquidity measure used to quantify the rate at which a company pays offits suppliers
AP trunover = cost of goods sold/AP
a higher # means the co. is paying its suppliers faster |
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Term
| Accounts Receivable Days Sales Outstanding |
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Definition
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Term
| Accounts Receivables - AR |
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Definition
money owed by customers for goods or services that have been received but not yet paid for.
created when a co. sells its products/services on credit
on balance sheet
as a current asset |
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Term
| Accounts Receivable Turnover |
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Definition
used to quantify a firm's effectiveness in extending credit and collecting from its customers.
Measures how quickly a credit customers will pay.
=Credit Sales /Accounts Receivables
(total sales can replace credit sales) |
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Term
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Definition
| system where revenue is recognized when earned (products sold or services performed) and expenses are recognized when incurred to generate revenues during a specific period of time regardless of when cash transaction occur. |
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Term
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Definition
Any expense incurred and shown on the income statement, but not paid for with cash.
listed as a current liability |
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Term
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Definition
Any expense incurred and shown on the income statement, but not paid for with cash.
listed as a current liability |
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Term
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Definition
expense incurred but not yet paid.
either short or long-term liabilities
on a company's balance sheet |
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Term
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Definition
aggregate depreciation of an asset up to a single point in its life. the depreciation expense of an asset during a period is added to the previous periods accumulated depreciation to get the current accumulated depreciation.
An asset's carrying value (net or book value) on the balance sheet is the difference between its purchase price and accumulated depreciation |
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Term
| Acid Test ratio or Quick Ratio |
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Definition
indicator of a firm's ability to cover short term liabilities with short-term assets without selling inventory.
other test of liquidity is current ratio
ATR - (Current Assets-Inventory)/Current Liabilities |
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Term
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Definition
amount of sales generated for every dollar of assets
AT = Sales/Totals Assets
one measure of how effectively using capacity |
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Term
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Definition
Owned or controlled business rsources that have future, quantifiable benefits.
people, brand, logo not included on a balance sheet |
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Term
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Definition
financial satement summarizing a company's assets, liabilities and owners' investment (owners' equiity or net worth) at a specific point in time.
Gives investors idea of what is owned, owed and how much has been invested.
Assets = Liabilities +Shareholders' Equity |
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Term
| Balance Sheet Equation Format (BSE) |
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Definition
used to illustrate the recording of business transaction and the construction of financial statements
Assets = Liabilities + Shareholder Equity |
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Term
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Definition
cash that moves in and out of a business.
inflows are a result of operating, investing or financing.
Outflows result from expenses, investments in assets, payments to creditors or owners |
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Term
| Cash Flow from Financing Activities |
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Definition
category in cash flow statement that accounts for funding
aciivites with the firm's capital providers
ex: issuing dividends, borrowing or repaying loans, sale or repurchase of equity |
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Term
| Cash Flow From Investing Activities |
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Definition
| item on cash fow statement that reports the aggregate change in a company's cash position resulting from investments or the sale of fixed assets, other companies' shares, or intangible assets. |
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Term
| Cash Flow From Operating Activities |
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Definition
Accounting item indicating the cash a company gets from its ongoing, regular business activities.
happiness is a positive cash flow refers to operating cash flows |
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Term
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Definition
financial statement that summarizes information about the cash inflows and outflows for a specific period of time.
Cash flows are categorized as
operating, investing, or financing |
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Term
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Definition
measures how many days a company is "out cash" from the time it pays for its inventory until it collects cash from its customers.
= Inventory Days on Hand + A/R Days Outstanding - A/P Days
negative cash operating cycle means collect from their customers before they pay their supplier for the product - this is rare |
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Term
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Definition
financial statement that displays all items as %'s of a common base figure. These statements allow for easy comparison between companies or across time periods for a given company.
the income statement base figure is Total Revenues
the balance sheet base figure is Total AssetS |
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Term
| Common Size Balance Sheet |
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Definition
lists each line item as a % of total assets
allows for easy comparison between companies or accross time periods for a given company |
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Term
| Common Size Income Satement |
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Definition
each line item expressed as a percentage of total revenue (sales)
allows for easy comparison between companies or across time periods for a given company |
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Term
| Common Stock (Equity or Shares) |
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Definition
a security that represents ownership in a corporation.
Holders of common stock exercise control by electing a board of directors and voting on corporate policy.
In the event of liquidation, common shareholders have residual rights to a company's assets, i.e., they are paid only after bondholders, perferred shareholders and other debtholders have been paid in full |
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Term
| Comparbles (Multiples or Relative) Analysis |
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Definition
| method which estimates value based on metrics of similar businesses. Comparables analysis uses the assumption companies with similar risks and business models with be values comparably by investors. common metrics for comparison include revenue, EBITDA, and Net Income. Also referred to as comparable Company Analysis (CCA) |
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Term
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Definition
| a bond that can be converted into a specified number of common shares, usually at the discretion of the bondholder |
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Term
| Cost of Goods Sold or Cost of Sales |
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Definition
direct costs attributable to the production or purchase of goods sold by a company. It excludes indirect expenses such as distribution costs and sales force costs
for a retailer - COGS is the wholesale price of the goods purchased for resale
a service company has no COGS but instead uses Cost of services provided which is primarily salaries |
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Term
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Definition
direct costs attributable to the production or purchase of goods sold by a company. It excludes indirect expenses such as distribution costs and sales force costs
for a retailer - COGS is the wholesale price of the goods purchased for resale
a service company has no COGS but instead uses Cost of services provided which is primarily salaries |
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Term
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Definition
companys debts or obligations due or payable within one year.
Current liabilities appear on the balance sheet
may include short-term debt, accounts payable, accrued liabilities, wages payable, taxes payable and other short-term debts |
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Term
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Definition
liquidity ratio that measures a company's ability to meet short-term obligations.
Current Ratio = Current Assets/ Current Liabilities
higher current ratio represents more liquidity |
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Term
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Definition
ratio is a measure of a company's ability to cover the principle and interest payments required by its current debt
EBIT/(interest + principal payments)
or
EBITDA/)interest + principal payments) |
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Term
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Definition
* measure of a company's financial leverage i.e. its use of debt to finance the business.
* also called total liabilities/stockholders' equity and
total interest-bearing debt/stockholders' equity
*ratio indicates what proportions of equity and debt are being used to finance the company's assets.
*higher number means more leverage |
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Term
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Definition
| method of allocating (expensing) the cost of a tangible fixed asset over its useful life |
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Term
| Discounted Cash flow Analysis |
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Definition
| valuation method based on forecasted cash flows and their risk. CF analysis discounts estimated future cash flows using a discount rate that reflects both the riskiness of the cash flows and the choice of debt and equity (most often the weighted average cost of capital). The result is an estimate of the present value of the company or project which generates the cash flows. |
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Term
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Definition
performance measurement which breaks ROE into three components
1. Profitability (net profit margin)
2. Asset utilization (total asset turnover)
3. Financial leverage (assets/equity)
ROE = Profit Margin (Profit/Sales) * Total Asset Turnover (Sales/Assets) * Financial Leverage (Assets/Equity)
tells us much more about performance than just looking at ROE alone |
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Term
| Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) |
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Definition
indicator of a company's operating performance.
frequently used as an approximation of operating cash flows and is popular as a comparables valuation metric |
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Term
| Earnings Before Tax (EBT) or Pre Tax Income |
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Definition
indicator of a company's operating performance calculated
as
EBT = Revenue - Expenses (excluding tax) |
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Term
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Definition
measurement of a company's operating profitability
EBITDA Margin = EBITDA/Revenues
Because EBITDA excludes depreciation and amortization, the EBITDA margin can provide an investor with a cleaner view of a company's core profitability |
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Term
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Definition
measure of a company's total market value, including debt and equity.
EV = market capitalization (total stock market value) plus debt, minority interest and preferred shares, minus "excess" cash |
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Term
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Definition
1. the use of various financial instruments e.g., liabilities, to increase the potential return of an investment tot he owners
2. The amount of debt used to finance a firm's assets.
A firm with significantly more debt than equity is considered to be highly leveraged. |
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Term
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Definition
| records that outline the financial activities of a business, an individual or any other entity. Financial statements for businesses usually include: income statements, balance sheet, statement of casah flows, as well as footnotes explaining the details of these statements |
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Term
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Definition
long term tangible asset used in the generation of revenue
factories, vehicles, machinery, etc. |
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Term
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Definition
measures a company's ability to generate sales from its fixed-assets. A high fixed-asset turnover ratio shows that the company has been more effetive in using the investment in fixed assets to generate revenues.
The ratio of sales to fixed assets.
FAT = Net Sales/Net Property, Plant & Equipment |
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