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FA - Chapter 3
Financial Statements, Cash Flow, and Taxes
19
Business
Undergraduate 2
03/28/2011

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Term
Annual Report
Definition
A report issued annually by a corporation to its stockholders. It contains basic financial statements as well a management's analysis of the firm's past operations and future prospects.
Term
Balance Sheet
Definition
A statement of a firm's financial position at a specific point in time.
Term
Working Capital
Definition
Current assets.
Term
Net Working Capital
Definition
Current assets minus accounts payable and accruals.
Term
Income Statement
Definition
A report summarizing a firm's revenues, expenses, and profits during a reporting period, generally a quarter or a year.
Term
Operating Income
Definition
Earnings from operations before interest and taxes.
Term
Depreciation
Definition
The charge to reflect the cost of assets used up in the production process. Depreciation is not a cash outlay.
Term
Amortization
Definition
A noncash charge similar to depreciation except that it is used to write off the costs of intangible assets.
Term
EBITDA
Definition
Earnings before interest, taxes, depreciation, and amortization.
Term
Statement of Cash Flows
Definition
A report that shows how things that affect the balance sheet and income statement affect the firm's cash flows.
Term
Statement of Stockholders' Equity
Definition
A statement that shows by how much a firm's equity changed during the year and why this change occurred.
Term
Free Cash Flow (FCF)
Definition
The amount of cash that could be withdrawn from a firm without harming its ability to operate and to produce future cash flows.
Term
Progressive Tax
Definition
A tax system where the tax rate is higher on higher incomes. The personal income tax in the United States which ranges from 0% on the lowest incomes to 35% on the highest incomes, is progressive.
Term
Marginal Tax Rate
Definition
The tax rate applicable to the last unit of a person's income.
Term
Average Tax Rate
Definition
Taxes paid divided by taxable income.
Term
Capital Gain or Loss
Definition
The profit (loss) from the sale of a capital asset for more (less) than its purchase price.
Term
Alternative Minimum Tax (AMT)
Definition
Created by Congress to make it more difficult for wealthy individuals to avoid paying taxes through the use of various deductions.
Term
Tax Loss Carry-Back or Carry-Forward
Definition
Ordinary corporate operating losses can be carried backward for 2 years and carried forward for 20 years to offset taxable income in a given year.
Term
S Corporation
Definition
A small corporation that, under Subchapter S of the Internal Revenue Code, elects to be taxed as a proprietorship or a partnership yet retains limited liability and other benefits of the corporate form of organization.
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