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| Accounting reports with past performance information that a firm issues periodically |
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| Contains financial statements and must be sent to shareholders each year by public companies |
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| Provides a common set of rules and a standard format for public companies to use when they prepare their reports |
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| Balance sheet/statement of financial position |
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| Lists the firms assets and liabilities; provides a snapshot of the firm's financial position at a given point in time |
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| Cash, inventory, PP&E, and other investments the company has made |
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| The firm's obligations to creditors |
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| The difference between the firm's assets and liabilities; measure of the firm's net worth |
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| Either cash or assets that could be converted to cash in one year |
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| Short-term, low-risk investments that can be easily sold and converted to cash |
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| Amounts owed to the firm by customers who have purchased goods or services on credit |
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| Composed of raw materials as well as work-in-progress and finished goods |
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| Net property, plant, and equipment |
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| Reduces the value of equipment due to wear |
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| The total amount deducted over an asset's life |
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| The value shown in the firm's financial statements; equal to acquisition cost less accumulated depreciation |
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| The excess paid for a company over book value |
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| Amortization/impairment charge |
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| Reduction of value of intangible assets |
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| Liabilities that will be satisfied within one year |
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| The amounts owed to suppliers for products and services purchased with credit |
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| Repayments of debt that will occur within the next year |
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| The difference between current assets and current liabilities |
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| Liabilities that extend beyond one year |
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| Any loan or debt obligation with a maturity of more than a year |
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| Long-term lease contracts that obligate a firm to make regular lease payments in exchange for use of an asset |
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| Taxes that are owed but have not yet been paid |
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| The difference between the firm's assets and liabilities |
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| The market value of equity |
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| Market-to-book ratio (Price-to-book ratio [P/B]) |
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| The ratio of market capitalization to the book value of stockholders' equity |
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| Firms with low market-to-book ratios |
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| Firms with high market-to-book ratios |
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| Enterprise value (Total enterprise value or TEV) |
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| Assesses the value of the underlying business assets, unencumbered by debt and separate from any cash and marketable securities |
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| Income statement/statement of financial performance |
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| Lists the firm's revenues and expenses over a period of time |
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| Measure of a firm's profitability over time; also referred to as earnings |
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| Difference between sales revenues and the costs |
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| The firm's gross profit net of operating expenses |
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| The firm's earnings before interest and taxes |
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| Net income divided by the total number of shares outstanding |
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| Gives the holder the right to buy a certain number of shares by a specific date at a specific price |
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| A form of debt that can be converted to shares |
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| Increase in shares that divide the same earnings |
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| A firm's disclosure of its potential for dilution from options it has awarded which shows the earnings per share the company would have if the stock options were exercised |
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| Utilizes the information from the income statement and balance sheet to determine how much cash the firm has generated and how that cash has been allocated during a set period |
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| Purchases of new property, plant, and equipment |
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| The difference between a firm's net income and the amount it spends on dividends |
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| Statement of stockholders' equity |
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| Breaks down the stockholders' equity computed on the balance sheet into the amount that came from issuing shares versus retained earnings |
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| Management discussion and analysis (MD&A) |
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| A preface to the financial statements in which the company's management discusses the recent year (or quarter), providing a background on the company and any significant events that may have occurred |
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| Off-balance sheet transactions |
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| Transactions or arrangements that can have a material impact on the firm's future performance yet do not appear on the balance sheet |
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| Current assets/current liabilities |
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| Compares only cash and "near cash" assets to current liabilities |
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| Accounts receivable/Average daily sales |
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| Accounts payable/Average daily cost of sales |
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| Accounts receivable turnover |
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| Inventory/Average daily cost of sales |
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| Accounts payable turnover |
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| Annual cost of sales/Accounts payable |
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| An alternative way to measure working capital |
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| Annual cost of sales/Inventory |
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| Comparing a firm's earnings with its interest expenses |
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| The extent to which a firm relies on debt as a form of financing |
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| Total debt/(Total equity+Total debt) |
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| Total debt-excess cash & short-term investments |
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| Debt-to-enterprise value ratio |
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Definition
Net debt/(Market value of equity+Net debt)
=Net debt/Enterprise value |
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| Total assets/book value of equity |
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| Price-earnings ratio (P/E) |
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Definition
Market capitalization/Net Income
=Share price/EPS |
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| Net income/Book value of equity |
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| (Net income + Interest expense)/Book value of assets |
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| Return on invested capital (POIC) |
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| EBIT(1-tax rate)/(Book value of equity + net debt) |
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| Measures how efficiently the firm is utilizing its assets to generate sales |
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| Improved accuracy of information given to both boards and shareholders |
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Definition
| A computation of a firm's earnings before interest, taxes, depreciation, and amortization are deducted |
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