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Uitgebreide samenvatting voor het tweede hoofdstuk van corporate finance in het Engels
Finance chapter 2
2.1 Firms Disclosure of Financial information Financial statements -> Accounting reports with past performance information that a firm issues periodically -> Must be presented to stakeholders -> Information about corporation Annual report -> Comprehensive report on a company's activities throughout the preceding year GAAP -> Generally Accepted Accounting Principles -> provide a common set of rules (easier to compare) Auditor -> checker of financial statements, to ensure that they are reliable and according to GAAP 4 types of financial statements Balance sheet income statement statement of cash flows statement of stockholders equity
2.2 The balance sheet The balance sheet (Statement of financial position) -> Lists firms assets and liabilities, providing a snapshot of the firm's financial position at a given point in time The balance sheet identity -> Assets = Liabilities + Stockholders' Equity Assets (left side) -> Cash -> Inventory -> Property -> Plant -> Equipment -> Other investments the company made Liabilities (right side) -> The firm's obligations to creditors Stockholders equity (right side) -> Difference between the firm's assets and liabilities -> Accounting measure of the firm's net worth
Current assets (cash or assets that could be converted into cash within one year) 1. Cash and other Marketable securities -> Short-term & Low-risk investments that can be easily converted into cash -> (money market investments like government debt) 2. Accounts receivable -> Amounts owed to the firm by customers who have purchased goods or services ON CREDIT 3. Inventories -> Raw materials -> work-in-progress -> Finished goods 4. Other current assets -> Catch-all category -> (prepaid expanses -> rent or insurance) Long-term assets 1. Net property, plant, and equipment -> Real estate or machinery that produce tangible benefits for 1+ year -> Deducted by depreciation expense (total amount deducted over its life) -> Book value of an asset (value shown in the firm's financial statements) Current liabilities (liabilities that will be satisfied within one year) 1. Accounts payable -> Amounts owed to suppliers for products or services purchased with CREDIT 2. Short-Term debt (notes payable) -> Repayments of debt that will occur in the next year 3. Other items -> Salary or taxes -> Unearned revenue Long-term liabilities (liabilities that extend beyond one year) 1. Long term-debt -> Any loan or debt obligation with a maturity more than one year -> (raise funds to purchase an asset) 2. Capital leases -> Long-term lease contracts that obligate to make regular lease payments in exchange for use of an asset -> (building) 3. Deferred taxes -> Taxes that are owed, but have not been payed yet Stockholders equity (Book value of equity) -> Difference between the firm's assets and liabilities -> Accounting measure of the net worth of the firm
Market value of equity = Shares outstanding X market price per share -> often referred to as market capitalization -> Measures the market value of the firms equity, or the value that remains after the firm has paid its debts Market-to-book ratio (Price-to-book ratio) -> Market value of equity / Book value of equity Value stocks -> Firms with low market-to-book ratio Growth stocks -> Firms with high market-to-book ratio
2.3 The income statement Enterprise value = market value of equity + debt - cash -> Assesses the value of underlying business assets, unencumbered by debt and separate from any cash and marketable securities The income statement (statement of financial performance) -> Lists the firm's revenues and expenses over a period of time Firm's net income -> Measure of its profitability during the period Earnings calculations 1. Gross profit -> First 2 lines of the income statement -> list revenues from sales of products and the costs incurred to make and sell the products -> Third line is gross profit = sales revenues - costs 2. Operating expenses -> Expenses from the ordinary course of running the business that is not directly related to producing the goods or services being sold -> Firm's gross profit net of operating expenses = operating income 3. Pretax and net income -> Net income = the total earnings of the firm's equity holders -> Earnings per share = net income / shares outstanding Stock options -> Give the holder the right to buy a certain number of shares by a specific date at a specific price Convertible bonds -> More total shares to divide the same earnings
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