FINANCE 300 Study Guide - Final Guide: Neede, Real Interest Rate, Internal Control
30 Oct 2014
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Chapter 2 financial statements, taxes, and cash flow: balance sheet, liquidity the speed and ease with which an asset can be converted to cash highly liquid asset is one that can be quickly sold without significant loss of value however, liquid assets are generally less profitable to hold, debt vs. equity: the use of debt in a firm"s capital structure is called financial leverage, the more debt, the greater leverage. Tax: average tax rate=total tax paid/total taxable income (for large corps, 35% flat tax rate, marginal tax rate=amount of tax payable on the next dollar earned, cash flow (different from accounting concept, cash flow from assets(cffa or free cash flow)=cash flow to creditors+cash flow to stockholders, cash flow from assets (cffa)=ocf capex change in nwc, operating cash flow (ocf) =ebit (earning before interest & tax) +depreciation taxes, capital spending (capex) =ending net fixed assets beginning net fixed assets+depreciation expense.
