Corporation — legal entity?
Separate from its owners with its own rights.
Financial statements overview?
Balance sheet, income statement, and cash-flow statement.
Balance sheet components?
Assets, liabilities, and equity.
Assets — types?
Current and long-term assets.
Depreciation — purpose?
Allocates asset cost over useful life.
Liabilities vs Equity?
Liabilities are obligations; equity is owner’s residual interest.
Working capital — formula?
Current assets minus current liabilities.
Market vs book equity?
Market value based on stock price; book based on accounting.
Income statement — focus?
Profitability over a period.
Financial ratios — purpose?
Assess performance, liquidity, leverage, and valuation.
Profitability ratios?
Measure profit relative to sales, assets, or equity.
Gross margin — calculation?
Gross profit divided by sales.
EBITDA margin — excludes?
Interest, taxes, depreciation, amortization.
Net income — also called?
Bottom line or net profit.
Balance sheet — equation?
Assets = Liabilities + Equity.
Current liabilities?
Obligations due within one year.
Net fixed assets?
Property, plant, equipment minus depreciation.
Capital employed — includes?
Fixed and circulating capital invested in operations.
Market-to-book ratio?
Market value divided by book value.
Income statement — main elements?
Revenues, expenses, net income.
Profit margin ratios?
Gross, EBITDA, EBIT, net profit margins.
Depreciation — effect?
Reduces asset book value over time.
Answer 11 questions on Fundamentals of Corporate Financial Statements.
1. According to the provided course content, what is a key characteristic that defines a corporation?
2. How can an investor most effectively use the financial statements overview to evaluate a company's short-term liquidity?
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