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ADVENTIS Exam with Complete Solutions |
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Board of Directors - ✔✔Hold management accountable and make board-level decisions about corporate strategy. Company Management - ✔✔Measure performance and make strategic, operating and financial decisions Creditors - ✔✔Measure creditworthiness, liquidity and bankruptcy Investors - ✔✔Make decisions on buying or selling equity investments Acquirers - ✔✔Determine valuation and make investment decisions Regulators - ✔✔Determine whether the company is opertating according to regulations and the law Revenue (or Sales) - ✔✔The amount charged for the delivery of goods or services Cost of Sales or Goods Sold - ✔✔The direct cost of producing revenue (like raw materials, direct wages) Gross Profit - ✔✔Revenue (less) cost of sales; indicates how efficiently labor and supplies are used in the production process
Operating Expenses - ✔✔All other expenses required to run the business (management salaries, marketing, travel) Operating Income (or EBIT) - ✔✔Revenue (less) [COGS (plus) Operating Expenses]; indicates a company's earning power from ongoing operations Non-Operating Expenses - ✔✔Expenses or income not related to the regular business of the company (interest expense, restructuing expenses, etc) Corporate Taxes - ✔✔Local and federal income taxes the company incurs Net Income or Earnings - ✔✔Revenue (less) all company expenses; indicates the increase in shareholders' value resulting from operations Cash - ✔✔Current assests comprising currency or currency equivalents that can be accessed immediately Accounts Receivable - ✔✔The amount owed to an organization from the sale of its products of services Fixed Assets - ✔✔The value of assets and property that cannot easily be converted to cash and has a useful life of greater than one year (example: Property, Plant, and Equipment) Accounts Payable - ✔✔The amount owed to an organization's vendors
Cash from Operating Activities - ✔✔The amount of cash generated by an organization's normal business operations, the most common of which includes net earnings, depreciation and amoritization, and change in working capital accounts Cash from Investing Activities - ✔✔Cash flow related to the acquisition and disposal of an organization's long-term investments, including PP&E and mergers and acquisitions; the most common line items include are CapEx and acquisitions Cash from Financing Activities - ✔✔Cash flow between an organizations and its owners and creditors, which includes common items like debt and equity issurances and repayments, and dividends and share repurchases Beginning cash balance - ✔✔Ending cash balance for the previous period of time Change in Cash - ✔✔Sum of cash from Operating, Investing and Financing Activities Ending Cash Balance - ✔✔Resulting cash balance for the selected period of time that is reflected on the balance sheet Depreciation & Amortization - ✔✔A method of allocating the cost of an asset over its useful life for both accounting and tax purposes. While this amount is an expense on the income statement, it does not actually represent cash leaving the company because cash only leaves when the asset is initially purchased (classified as CapEx)— This is why __________________ is a source of cash on the cash flow statement, due to it being a non- cash expense
Capital Expenditures - ✔✔Funds used by a company to purchase or upgrade physical assets such as plants, property and equipment Change in Working Capital - ✔✔The impact to cash resulting from all non-cash current asset accounts and all non-debt current liability accounts— A decrease in ______________ represents a source of cash and would be represented on the cash flow statement as a positive number; an increase in ______________, however, represents a use of cash and would be represented on the cash flow statement as a negative number Share Repurchase - ✔✔The reacquisition by an organization of its own stock, which is either retired or kept as treasury stock; a form of returning capital to shareholders that can be instituted irregularly rather than a normal dividend program— When ________ are __________________, the remaining shareholders have a higher ownership recentage and portion of earnings Dividends - ✔✔Distribution of cash to current shareholders; unlike share repurchases, this does not affect ownership percentages and represents a pure "check" to shareholders— This value is most often derived from a ____________ per share amount as directed by an organization's board of directors.....
Credit Ratios - ✔✔Measures a company's ability to meet its long-term obligations and benchmark its overall capital structure; umbrella term used to describe Total Leverage, Net Leverage, Debt-to-Equity, and EBITDA Interest Coverage Ratio Market Ratios - ✔✔Measure investor response to owning a company's stock Current Ratio - ✔✔Current Assets (divided by) Current Liabilities; indicates whether a company's short term assets are readily available to pay off its short-term liabilities (1.50 and 3.00 is considered normal) Cash Ratio - ✔✔Total Cash (divided by) Current Liabilities; indicates a company's ability to use cash to pay off its current liabilities (0.20 and 1.00 is considered normal) Days Receivables - ✔✔[Accounts Receivable (divided by) Annual Revenue] (multiplied by) 365; the average number of days an invoice is in accounts receivable before collection— ______ ______________ of 60.0 means a company's invoices are on average paid down in 60 days Asset Turnover - ✔✔Total Revenue (divided by) Total Assets; defined as the amount of revenue generated per dollar of assets and measures the efficiency of a company's use of assets in generating sales revenue—
An ________ _____________ of 2.50 means that for every dollar in assets, a company generates $2. in revenue Gross Margin - ✔✔Gross Profit (divided by) Revenue; indicates how efficiently labor and supplies are used in the production process relative to revenue— A __________ ___________ of 35.0% means that for every $1.00 of revenue, $0.35 is converted into gross profit Operating Margin - ✔✔Operating Income (divided by) Revenue; indicates a company's earning powers from ongoing operations relative to revenue— An ____________ __________of 15.0% means that for every $1.00 of revenue, $0.15 is converted into operating income Net Margin - ✔✔Net Income (divided by) Revenue; indicates the increase in shareholders' equity from earnings, relative to revenue— A _________ of 10.0% means that for every $1.00 of revenue, $0.10 is converted into net income Return on Equity - ✔✔Net Income (divided by) Shareholders' Equity; measures profits earned for each dollar invested in a company's equity A _______________ of 17.0% means that $0.17 of net income is produced from $1.00 of equity invested
Enterprise Value (Firm Value or EV) - ✔✔Equity Value (Plus) Net Debt; shows the sum of all claims on a company (the entire firm's value) and is independent of capital structure— An ____________ _______of $150 million means that the sum of all claims (debt and equity) on a company total to $150 million Equity Value (Market Value or Market Capitalzation) - ✔✔Enterprise Value (less) Net Debt OR Share Price (multiplied by) Shares Outstanding; __________ _______ is the value of the equity shareholders' portion of the company, or the value of all the shares outstanding Price/Earnings (P/E) - ✔✔Market Value (divided by) Net Earnings; shows how much investors are willing to pay per dollar of earnings and is affected by leverage— A _____________ of 15.0x means that investors are willing to pay $15.00 for every $1.00 of net income Earnings per Share (EPS) - ✔✔Net Earnings (divided by) Shares Outstanding; Shows the amount of earnings attributable to a share of common stock— An _____ of $2.45 means that $2.45 was earned for every share of stock outstanding
Dividend Yield - ✔✔Dividend per Share (divided by) Market Price per Share; shows the return on a share of common stock— A ____________ of 20% means that for every $1.00 in stock price value, $0.20 was distributed to shareholders as dividends Enterprise Value/EBITA - ✔✔Enterprise Value / EBITDA; measures the value of common stock in a way that enables comparison of companies across different industries— An ________________ multiple of 4.5x means that for every $1.00 of EBITDA, the company is worth $4. Enterprise Value/Revenue - ✔✔Enterprise Value (divided by) Revenue; compares the total value of a company to its revenue; An _____________ multiple of 1.5x means that for every $1.00 of revenue the company is worth $1. Positive Net Income - ✔✔Impact to Financial Statements: both Cash and Equity increases Pay Debt - ✔✔Impact to Financial Statements: both Cash and Debt decreases Submit an invoice to a customer - ✔✔Impact to Financial Statements: both Revenue and Accounts Receivable increases
