3FA3-CH3+CH4.docx

22 views1 pages
Commerce 3FA3
Chapter 3: Working with Financial Statements
Sources of cash: A firm’s activities that generate cash
Uses of cash: A firm’s activities in which cash is spent
Statement of Cash flows: A firm’s financial statement that summarizes its sources and uses of
cash over a specified period
Common-size statement: A standardized financial statement presenting all items in percentage
terms. Balance sheets are shown as a percentage of assets and income statements as a
percentage of sales.
Common-base-year statement: A standardized financial statement presenting all items relative
to a certain base year amount
Financial ratios: Relationships determined from a firm’s financial information and used for
comparison purposes
Chapter 4: Long-term Financial Planning and Corporate Growth
Planning Horizon: The long-range time period the financial planning process focuses on, usually
the next 2-5 years
Aggregation: Process by which smaller investment proposals of each of a firm’s operational
units are added up and treated as one big project
Percentage of Sales Approach: Financial planning method in which accounts are projected
depending on a firm’s predicted sales level
Dividend Payout ratio: Amount of cash paid out to shareholders divided by net income
Retention Ratio or plowback ratio: Retained earnings divided by net income
Capital Intensity Ratio: A firm’s total assets divided by its sales or the amount of assets needed
to generate $1 of sales
External financing needed (EFN): The amount of financial required for balancing both sides of
the balance sheet
Internal Growth Rate: The growth rate a firm can maintain with only internal financing
Debt capacity: The ability to borrow to increase firm value
Sustainable Growth Rate: The growth rate a firm can maintain its given its debt capacity, ROE,
and retention ratio
Unlock document

This preview shows half of the first page of the document.
Unlock all 1 pages and 3 million more documents.

Already have an account? Log in

Get OneClass Notes+

Unlimited access to class notes and textbook notes.

YearlyBest Value
75% OFF
$8 USD/m
Monthly
$30 USD/m
You will be charged $96 USD upfront and auto renewed at the end of each cycle. You may cancel anytime under Payment Settings. For more information, see our Terms and Privacy.
Payments are encrypted using 256-bit SSL. Powered by Stripe.