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Financial Planning

Chapter 17

QuestionAnswer
S corporation a small corporation that elects to be to be taxed as a proprietorship or partnership yet keep corporation limited liability.
Tax Loss carryback and carryover Operating losses that can be carried back and fourth in time to offset taxable income in a year.
Capital Gain(loss) asset sold for less than it's depreciated value.
Financial Planning The projection of sales, income,and assets as well of the resources needed to achieve them.
Financial Control phase in which financial plans are implemented.
Sales Forecast A forecast of a firm's unit and dollar sales for some future period. Base on trends
AFN (additional funds needed) Funds a firm must raise externally by new borrowing or selling stock
Projected (pro forma) balance sheet method A method of financing financial requirements based on forecasted financial statements.
Spontaneously generated funds Funds that are obtained from routine business transactions.
Financing Feedbacks The effects on the income statement and balance sheet of actions taken to finance forecasted increases in assets
Lumpy Assets Assets that can only be obtained in large in large discrete amounts
Operating breakeven analysis studies the relationship among sales, revenues, operating costs, and profits
operating breakeven point level of production and sales which the net operating income is zero. revenues from sales equal total operating costs.
Operating Leverage A firms fixed assets
Degree of operating Leverage The percentage change of NOI(or EBIT) associated in the change in sales volume.
Financial breakeven analysis determining the operating income (EBIT) the firm needs to cover all of its financing costs and produce earnings per share equal zero.
Financial breakeven point The level of EBIT at which EPS equals zero
Financial leverage how change in operating income affects earning s per share.
Degree of financial leverage (DFL) The percentage change in EPS taht results from a given percentage change in EBIT
Degree of Total Leverage (DTL) The percentage change in EPS that results from a 1 percent change in sales
taxable income gross income minus exemptions and allowable deductions as set forth in tax code
progressive tax a tax that requires a higher percentage payment on higher incomes
marginal tax the tax applicable to the last unit of income (the tax payer;s tax bracket)
Created by: 5000587