Term
| General Features of the Balanace Sheet |
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Definition
1. The Balance sheet is a snapshot in time
2. All listings are at historical cost
3. Two alternative names
a. Statement of Financial Conditions
b. Statement of Financial position
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Term
| General Features of the 2002 Sarbanes-Oxley Act |
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Definition
1. Establishes independent oversight for for SEC regulated business corporations
2. Establishes new responsibilities for corporate audit committees and corporate officers
3. Establishes new public company reporting requirements
4. Defines prohibited 'non-audit services' for accounting firms.
5. Increased penalties for corporate fraud
6. Requiring rules to address conflicts of interest. |
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Term
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Definition
| Assets are entities that provide a future benefit. They are listed at historical cost. |
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Term
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Definition
Obligation to provide a future benefit to
another |
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Term
| Alertantive terms for "Equity" |
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Definition
§ Different names based on different (legal) entities
§ Proprietorship
§ Partners’ Equity
§ Shareholders’ Equity |
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Term
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Definition
(1) Current assets--expected to be converted into cash or
consumed within one year (i.e., cash, marketable securities,
notes receivable, accounts receivable, inventories and prepaid
expenses)
(2) Long-term investments--not expected to be converted into
cash or used for more than a year
(3) Fixed assets--usually arranged according to permanence
(i.e., land, buildings, machinery and equipment, and furniture
and fixtures)
(4) Intangible assets (i.e., patents, copyrights and trademarks) |
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Term
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Definition
(1) Current liabilities (i.e., notes payable, accounts payable,
accrued liabilities, accrued taxes, and deferred revenue)
• Require payment in one year or less
(2) Long-term liabilities- (i.e., long-term debt, capital lease
obligations, and other liabilities)
• Do not require payment for at least one year
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Term
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Definition
| Increases from business activities, such as revenues or gains. |
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Term
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Definition
| Decreases due business activities. Such as losses or expenditures. |
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Term
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Definition
Common stock
Preferred stock
Additional paid-in capital
Retained earnings |
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Term
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Definition
1. Authorized--Stock authorized but not sold.
2. Issued--Stock that has been sold.
3. Outstanding--Stock in the hands of private shareholders
4. Treasury--Stock that has been repurchased by the corporation. |
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Term
| How is the statement of cash flows divided? |
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Definition
Cash from Operations
Cash from Investments
Cash from Financing |
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Term
| What are the 3 types of Financial statements? |
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Definition
1. The Balance sheet--measures assets, liabilities and equity.
2. The Income statement--measures revenues and expenditures.
3. Statement of Cash Flows--Measures the sources of a companys cash and cash equivalents. |
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Term
| What are the general options for expenses paid for, but not yet consumed? |
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Definition
a) Record payment as expense originally and
then defer unused portion at end of period
b) Record payment as prepaid item (asset) and
then accrue expense for portion used
c) Record payment as expense for that portion
which will be used during the period and treat
balance as prepaid item (asset) |
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Term
| What are the options of revenues received but not yet earned? |
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Definition
a) Record cash receipts as revenue originally and then
defer unearned portion at end of period
b) Record cash receipts as deferred or unearned
revenue (liability) and then accrue revenue for
portion earned
c) Record cash receipts as revenue for that portion
which will be earned during the period and treat
balance as deferred or unearned revenue (liability) |
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Term
| Basic Revenue Recognition Requirements: FASB |
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Definition
Exchange transaction
Receipt of cash or readily ascertainable cash equivalent
Substantial completion of earnings process |
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Term
Revenue Recognition requirements per "Staff
Accounting Bulletin No. 101"
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Definition
»Arrangement exists
»Delivery of product or performance of services
»Fixed or determinable sales price
»Collectibility reasonably assured |
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Term
| What are the types of cost allocation? |
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Definition
Depreciation
Amortization
Depletion |
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Term
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Definition
| Allocation of the cost of an asset over the span of its useful life. |
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Term
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Definition
| The depreciation of intangible assets |
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Term
| Definition: Receivable Turnover |
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Definition
How many times, on average, does a company turn its receivables into cash during an accounting period? |
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Term
Definition: Days’ Sales Uncollected |
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Definition
How
long, on average, does it take a company to collect its accounts receivables? |
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Term
| How is the uncollectable accounts expense accounted for in the financial statements? |
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Definition
Uncollectible Accounts Expense appears on the income statement as an operating expense |
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Term
| Where is the allowance for allowance for uncollectable accounts on the balance sheet? |
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Definition
| The allowance for collectable accounts appears as a subset of accounts receivable on the liabilities portion of the balance sheet. |
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Term
| Formula for compound interest? |
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Definition
| Pn=Po(1+interest rate)years |
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Term
Defintion: Cash equivalents
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Definition
| Cash equivalents are short-term, highly liquid investments that are both: (a) readily convertible to known amounts of cash, and (b) so near their maturity that they present insignificant risk of changes in interest rates |
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Term
Five Steps of
Financial Statement Analysis |
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Definition
•Assessing the business environment.
•Reading and studying the financial statements and footnotes.
•Assessing earnings quality.
•Analyzing the financial statements.
•Predicting future earnings
and/or cash flow. |
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Term
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Definition
Net Income/Average stockholder's equity
It measures the effectiveness at managing capital provided by owners. |
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Term
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Definition
Net income +[Interest Expense (1-Tax Rate)]/
Average total assets
Measures the effectiveness of the company at managing capital provided by investors. |
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Term
| Return on Sales (Profit Margin) |
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Definition
Net income + [Interest expense (1-tax rate)]/Net Sales
Measures the company's ability to successfully make and sell its product while controlling it's costs. |
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Term
| Capital Structure Leverage |
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Definition
Average total assets/Average total liabilities
Measures the extent to which a company relies on borrowings. |
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Term
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Definition
Average liabilites/average stockholder's equity
Compares liabilities to stockholder's equity |
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Term
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Definition
Long term liabilities/Total assets
Measures long term debts as a source of asset financing |
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Term
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Definition
Current Assets/Current Liabilites
Is a quick measure of a company's ability to meet it's debts as they come due. |
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Term
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Definition
Cash+Marketable securities+Net receivables/Current liabilities
More stringent "Quick Look" at solvency |
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Term
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Definition
(Interest Expense+Tax expense+Net Income)/Interest Expense
Compares annual funds available to meet annual interest |
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Term
| Accounts Payable turnover |
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Definition
Cost of goods sold/Average accounts payable
Measures the degree to which accounts payable are a source of financing. |
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Term
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Definition
Net Credit Sales/Average Accounts Receivable
Measures the times that the trade receivables were recorded, collected and recorded in the same period |
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Term
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Definition
Cost of goods sold/Average inventory
Measures the speed at which inventories move through operations |
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Term
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Definition
Sales/Average total assets
Measures the speed at which all assets move through operations |
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Term
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Definition
net income/avg. shares outstanding
Primary measure of a company's performance |
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Term
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Definition
| Market price per share/Earnings per share |
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Term
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Definition
Dividends per share/ Mkt. Price per share
Indicates cash return on shareholder's investment |
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Term
| Under MCBA when is a company prohibited from paying a dividend? |
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Definition
If after paying the dividend
a) The total assets would be less that the sum of its total liabilities, plus the amount that would be needed to satisfy the rights of preferential stockholders. |
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