Assets: Balance Sheet

Question 1

Balance Sheet

Answer 1

Shows how much cash a company has, owes and what is left over for its stockholders; ones net worth

Question 2

Current Assets

Answer 2

Everything a company can turn into cash in a short time period; i.e. Cash and Cash equivalents, short term investments, other holdings, etc

Question 3

Cash & Cash Equivalents

Answer 3

Money available in bank accounts, savings bonds, certificates of deposits and money market funds.

Question 4

How much cash should a company have on hand?

Answer 4

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.

Question 5

Short Term Investments

Answer 5

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.

Question 6

Auction Rate Securities

Answer 6

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.

Question 7

Account Receivables

Answer 7

Money owed to company by its customers.

Question 8

Reserves

Answer 8

Cash set aside to pay suppliers in the event of a delinquent account (AR).

Question 9

AR Turnover

Answer 9

(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

Question 10

Ideal ART ratio

Answer 10

Larger is better; compare to industry standards and Competitor ratio. For a company with Net 30 terms idealistically ratio would be 12:1

Question 11

Inventory

Answer 11

Merchandise a business owns but has not sold

Question 12

Inventory problems to look out for:

Answer 12

Too much inventory runs to risk of spoilage or obsolesce (ob-soless)

Question 13

IT- Inventory Turnover Ratio

Answer 13

COGS/ AI (average inventory)- shows the ratio of how many times inventory is sold during a period. Larger ratio is better

Question 14

365/IT

Answer 14

Shows how many days it takes for a company to turnover its inventory.

Question 15

Prepaid Expenses

Answer 15

Payments made for service or merchandise not yet received.

Question 16

Notes Receivables

Answer 16

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.

Question 17

Other Current Assets

Answer 17

Other non-cash assets owed to a company within a year.

Question 18

Long Term Investments

Answer 18

Listed after CA and B4 PPE; Asset class of investments that will not produce cash in a year.

Question 19

Property Plant and Equipment

Answer 19

Asset class that includes property of company, building and any equipment used to produce a product or service for the company.

Question 20

Goodwill

Answer 20

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.

Question 21

Intangible Assets

Answer 21

Assets that are not material; i.e, copyrights, patents, trademarks, trade names, mail list, brands

Question 22

Other Assets

Answer 22

Other assets that do not fit any specific class.

Question 23

Amortization

Answer 23

The systematic allocation of a balance sheet item as an expense or revenue account on the IS.

Question 24

Accumulated Amortization/Bond Issue Cost

Answer 24

Other Asset Account: Prepaid Bond issuance cost

Question 25

Deferred Long Term Asset Charges

Answer 25

Other Asset account that such as bond issue cost that will later be expensed on income sheet.