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