Adventis FMC Level 1 MC Practice Exam Complete Solutions | Already Passed| Verified

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what is the purpose of the income statement? What does it indicate? - ✔✔to show stakeholders if the firm made or lost money during the period being reported it indicates how revenues are transf... ormed into net income define: Revenue - ✔✔the amount charged for the delivery of goods and services define: COGS - ✔✔direct costs of producing revenue define: Operating Expense - ✔✔all other expenses required to run the business what does Operating Income indicate? -what is the other word for it? - ✔✔Op income indicates a company's earnings power from ongoing operationsAnother work for Operating profit is EBIT what does net profit indicate for the shareholder? - ✔✔indicates the increase in shareholder value resulting from the operations of the firm list the general flow of the income statement - ✔✔revenue (COGS) Gross Profit (Operating expense) Operating Income (non Op Expense) (Tax) Net Income what does the balance sheet show - ✔✔it is a financial statement that represents the financial position of the company on a particular date Balance sheet: Assets are what the company _____, Liabilities are what the company _____, and equity is the ------ ------ - of shareholders against the company - ✔✔Assets are what the company owns, Liabilities are what the company owes, and equity is the Remaining Claims of shareholders against the company Define: Debtwhich statement is it found on? - ✔✔the amount of obligations owed to creditors It is found on the balance sheet Define: Equity which statement is it found on? - ✔✔Equity is the cumulative shareholder investments + cumulative net earnings equity is found on the balance sheet working capital: - what does it measure? - how is it calculated? - what does a negative CHANGE in working capital indicate about cash for the company? - ✔✔Working capital measures the efficiency and short term financial health working capital= (non-cash current assets)- (non debt current Liabilities)A negative change in working capital indicates that it is a SOURCE of cash. the firm grows on the limbs of their suppliers, and this cash received is positive is short term debt included when calculating the working capital for the firm? - ✔✔no, short term debt isn't included because working capital= (non-cash current asset)- (NON-DEBT current liabilities) which financing is cheaper for the firm and less risky for the investor: Debt or Equity Financing Explain why its less riskier? - ✔✔debt financing is cheaper and less risky debt holders have a priority claims on the firm's assets if the firm goes bankrupt while equity holder have no guarantee that they will get their investment back if the firm goes bankrupt what statements will be use to derive the metrics to calculate the working capital for the firm? - ✔✔we only need to use the balance sheet remember: WC= non cash current assets- non debt current liabsall of these values can be found on the balance sheet net debt: -what is it? - what financial statements do we use to derive the metrics used to calculate it? - ✔✔net debt is a key financial metric used to determine the resulting debt the firm would have, if the firm used all its cash on hand to [ay down their debt we only need the balance sheet since: net debt = total debt-cash **both can be found on the balance sheet ** Cash Flow Statement: - what does it show? - what does it reconcile? - ✔✔the cash flow statement shows how changes in the balance sheet accounts and net income affect the cash balance of the firm it reconciles net income to changes in cash list the 3 types of activities on the cash flow statement - ✔✔1. cash from operations 2. cash from investing 3. cash from financing [Show More]

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