Assets: Balance Sheet Flashcards
Balance Sheet
Shows how much cash a company has, owes and what is left over for its stockholders; ones net worth
Current Assets
Everything a company can turn into cash in a short time period; i.e. Cash and Cash equivalents, short term investments, other holdings, etc
Cash & Cash Equivalents
Money available in bank accounts, savings bonds, certificates of deposits and money market funds.
How much cash should a company have on hand?
Enough to pay dividends, make capital purchases, etc; not so much that they are not paying dividends or reinvesting. Also cash may be from loan, so too much cash could indicate money was borrowed.
Short Term Investments
Investments that will be sold in the short term to provide cash; its a good indicator when a company holds a lot of cash and is able to invest it in something that can return more interest than a regular corporate savings accounts.
Auction Rate Securities
Market has ceased to exist since 2008 but were essentially long term investments that returned interest rates that were reset periodically through Dutch Auctions. Some companies ARS are frozen and cannot be accessed but can still be listed as a current asset. However- most companies have taken them as a loss by now.
Account Receivables
Money owed to company by its customers.
Reserves
Cash set aside to pay suppliers in the event of a delinquent account (AR).
AR Turnover
(Credit) Sales/ Average AR shows how fast a company collects its payments from customers. Sales are found to IS and AR from CY & PY Bal Sheets
Ideal ART ratio
Larger is better; compare to industry standards and Competitor ratio. For a company with Net 30 terms idealistically ratio would be 12:1
Inventory
Merchandise a business owns but has not sold
Inventory problems to look out for:
Too much inventory runs to risk of spoilage or obsolesce (ob-soless)
IT- Inventory Turnover Ratio
COGS/ AI (average inventory)- shows the ratio of how many times inventory is sold during a period. Larger ratio is better
365/IT
Shows how many days it takes for a company to turnover its inventory.
Prepaid Expenses
Payments made for service or merchandise not yet received.
Notes Receivables
An asset of an organization that hold w written promissory note from another party; i.e. a company loans another company 10K and 5k has to be paid back within the 1st year. That 10k is a notes receivable asset but the 5k is the current portion, leaving the remainder as a non-current investment.
Other Current Assets
Other non-cash assets owed to a company within a year.
Long Term Investments
Listed after CA and B4 PPE; Asset class of investments that will not produce cash in a year.
Property Plant and Equipment
Asset class that includes property of company, building and any equipment used to produce a product or service for the company.
Goodwill
Intangible Asset: Is the remaining cost of a company that has been acuired by another company minus the fair market value and amount for the tangible and identifiable intangible assets.
Intangible Assets
Assets that are not material; i.e, copyrights, patents, trademarks, trade names, mail list, brands
Other Assets
Other assets that do not fit any specific class.
Amortization
The systematic allocation of a balance sheet item as an expense or revenue account on the IS.
Accumulated Amortization/Bond Issue Cost
Other Asset Account: Prepaid Bond issuance cost
Deferred Long Term Asset Charges
Other Asset account that such as bond issue cost that will later be expensed on income sheet.
