COMM 203 Lecture 2: Chapter 2 review
Document Summary
Chapter 2 review: financial statements, cash flow, and taxes. In 2011, publicly traded firms in canada switched to international financial reporting standards (ifrs) Flexibility on how to present financial statement. Net working capital: the difference between a firm"s current assets and current liabilities. Positive when current asset exceeds current liabilities. Liquidity: refers to the speed and ease with which an asset can be converted to cash. Debt: involves borrowing money to be repaid plus interest. Equity: involves raising money by selling interest in the company. If the firm sells its asset and pays its debts, whatever is left belongs to the shareholders. The use of debt in a firm"s capital structure is called financial leverage: the more debt a company has (as a percentage of assets) the greater is its degree of financial leverage. The accounting value of a firm"s assets is called the carrying value. Ifrs: allows companies to use historical cost method, allows use of fair value method.
