Analyzing Income Statements Flashcards
What is “unearned revenue”?
- A liability account for money that has been collected for goods or services that have not yet been delivered.
- Payment received in advance of providing goods or services.
- Also called “deferred revenue” or “deferred income”
What are “Period Costs”?
Costs (e.g., executives’ salaries) that cannot be directly matched with the timing of revenues and which are thus expensed immediately.
What are “Ordinary Shares”?
Equity shares that are subordinate to all other types of equity (e.g., preferred equity).
Also called common stock or common shares.
What is “Common Stock”?
A type of security that represents an ownership interest in a company. Also called common shares.
What is “Diluted EPS”?
The EPS that would result if all dilutive securities were converted into common shares.
What is “Basic EPS”?
Net earnings available to common shareholders divided by the weighted average number of common shares outstanding.
What is the “If-Converted” method?
A method for accounting for the effect of a convertible security on EPS that specifies what EPS would have been if the convertible securities had been converted at the beginning of the period.
What does “Anti-dilutive” mean?
With reference to a transaction or a security, one that would increase EPS or result in EPS higher than a company’s basic EPS.
Yes/No:
Should Anti-dilutive securities be included in the calculation of diluted EPS?
No. They are not included.
What is “net profit margin”?
- an indicator of profitability
- calculated by net income / revenue
- also called profit margin.
What is return on sales?
- an indicator of profitability
- calculated by net income / revenue
- also called net profit margin.
What is “gross profit margin”?
The ratio of gross profit to revenues.
What is operating margin?
Operating income / revenue
What is pre-tax margin?
EBT / revenue
