What is GAAP?
GAAP stands for Generally Accepted Accounting Principles, which are standard accounting rules used in the U.S.
What is a Cash Flow Statement?
It tracks the flow of cash in and out of a business over time.
What is an Income Statement?
An Income Statement shows a company’s revenues and expenses over a period, highlighting net profit or loss
What is a Balance Sheet?
A Balance Sheet shows a company’s assets, liabilities, and equity at a specific point in time
What are the main financial statements?
The three main financial statements are the Balance Sheet, Income Statement, and Cash Flow Statement.
What is the difference between finance and accounting?
Accounting focuses on recording, classifying, and summarizing financial transactions. Finance deals with managing assets, investments, and financial planning.
Summary
Risk and Return to an Individual Asset Investors are interested in both the return they can expect to receive when making an investment and the risk associated with that investment. In finance, risk is considered the volatility of the return…
Using Excel to Make Investment Decisions
Learning Outcomes By the end of this section, you will be able to: Average Return and Standard Deviation for a Single Stock Excel can be used to calculate the average returns and the standard deviation of returns for both a…
Applications in Performance Measurement
Learning Outcomes By the end of this section, you will be able to: Sharpe Ratio Investors want a measure of how good a professional money manager is before they entrust their hard-earned funds to that professional for investing. Suppose that…
The Capital Asset Pricing Model (CAPM)
Learning Outcomes By the end of this section, you will be able to: Risk-Free Rate The capital asset pricing model (CAPM) is a financial theory based on the idea that investors who are willing to hold stocks that have higher systematic risk…