The analysis of execution costs, non-continuous trading, and many other real-world market inefficiencies is a significant area of interest in academic finance. However, research in this area is predominantly at an advanced level and out of reach of most undergraduates and MBAs.
Chapter 1 Equity Fundamentals (Part 1): Introduction to Financial Statements
, and firm
are used interchangeably throughout the text. However, while company
are general terms, corporation
has a specific legal definition. All publicly traded companies are corporations.
There are many ways to do this. The most common is straight-line depreciation
, in which an equal amount is written off each year over the life of the asset. Depreciation can also be front-loaded to recognize more of the loss of value of the asset in the first few years, which is sometimes more consistent with the actual resale value of many goods.
The method for constructing the statement of cash flows presented here—in which the starting point for determining the net cash to the firm is to use the net income from the income statement—is called the indirect method
and is by far the most common in practice. There is another method called the direct method
in which actual cash receipts and payments are itemized starting from cash payments received from customers. Both methods must, by definition, arrive at the same final result.
Chapter 2 Equity Fundamentals (Part 2): Financial Ratios, Valuation, ...