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Corp Finance


capital structure The mixture of debt and equity maintained by a firm.
working capital A firm's short-term assets and liabilities.
sole proprietorship A business owned by a single individual.
partnership A business formed by two or more individuals or entities.
corporation A business created as a distnct legal entity composed of one or more individuals or entities.
Agency Problem The possibility of conflict of interest between the stockholders and management of a firm.
stakeholder Someone other than a stockholder or creditor who potentially has a claim on the cash flows of the firm.
balance sheet Financial statement showing a firm's accounting value on a particular date.
Net working capital Current assets less current liabilities.
Generally Accepted Accounting Principles (GAAP) The common set of standards and procedures by which audited financial statements are prepared.
Income Statement Financial statement summarizing a firm's performance over a period of time.
Noncash items Expenses charged against revenues that do not directly affect cash flow, such as depreciation.
Average tax rate Total taxes paid divided by total taxable income.
Marginal tax rate Amount of tax payable to the next dollar earned.
Tax flow from assets The total of cash flow to creditors and cash flow to stockholders, consisting of the following operating cash flow, capital spending, and change in net working capital.
Operating cash flow Cash generated from a firm's normal business activities.
Free cash flow Another name for cash flow from assets.
Cash flow to creditors A firm's interest payments to creditors less net new borrowings.
Cash flow to stockholders Dividends paid out by a firm less net new equity raised.
Sources of cash A firm's activities that generate cash.
Uses of cash A firm's activities in which cash is spent. Also called applications of cash.
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 sheeet items are shown as a percentage of assets and icome statement items 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.
Du Pont Identity Popular expression breaking ROE into three parts; operating efficiency, asset use efficiency, and financial leverage.
Standard Industrial Classifications (SIC) codes A U.S. government code used to classify a firm by its type of business operations.
capital budgeting The process of planning and managing a firm's long-term investments.
Created by: rfillmore