Balance Sheet Flashcards

1
Q

What are accrued liabilities?

A

Expenses that the company has incurred but not yet paid

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2
Q

What is accumulated depreciation?

A

Estimated amount of the fixed asset the company has used up since acquisition

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3
Q

What is allowance for doubtful accounts?

A

The amount the company is owed by customers that it estimates it won’t receive

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4
Q

What does the balance sheet express?

A

Expresses a companies assets, liabilities, and owner equity at a point in time

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5
Q

What defines assets/liabilities as current?

A

Assets expected to be converted to cash in one year/obligations that will require payment within a year

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6
Q

Equity (meaning, equation)

A

A) The value that the owners contributed to the company
+
B)Retained earnings

= Assets - liabilities

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7
Q

What are intangible assets?

A

Assets not physical but still contributing

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8
Q

What is Non-current liability?

A

Long term liability, debt, obligations that won’t be satisfied by current assets

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9
Q

Who delegates and who makes accounting rules?

A

SEC delegates to FASB (faz-bee), the financial accounting standards board

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10
Q

Who makes international accounting rules and what are they called?

A

International financial reporting standards (IFRS) established by the IASB

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11
Q

Who is responsible for financial reporting?

A

Company management

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12
Q

What do auditors do?

A

Express an unqualified, modified, or adverse opinion about whether the statements are presented fairly according to gaap

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13
Q

What is the balance sheet?

A

Financial position of a co on a specific date

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14
Q

What is the income statement ?

A

Results of operations over a given period of time using accrual accounting

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15
Q

What is a statement of cash flows?

A

Sources and uses of cash over a given period

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16
Q

What is a statement of stockholders equity?

A

Changes in owner’s equity over a period of time

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17
Q

What are the three sections of the cash flow statement, and what does each cover?

A

Operating (day to day business activities), investing (acquisition or disposal of long-lived productive assets, financing (relating to owners and creditors)

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18
Q

What is accrual accounting?

A

Recognition of revenue and expenses tied to business activities

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19
Q

Net income equation?

A

Net income =
Revenue - expenses

(Doesn’t equal change in cash)

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20
Q

How to calculate retained earnings?

A

Net income - dividends

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21
Q

Owners’ equity = ? (Not A = L + E)

A

Contributed capital + retained earnings

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22
Q

Retained earnings=?

A

Prior retained earnings
+net income
-dividends

23
Q

Net income =?

A

Revenues - expenses

24
Q

Complete balance sheet equation?

A

Assets =
Liabilities
+ contributed capital
+ prior retained earnings
+ revenues
- expenses
-dividends

25
When is an asset recognized?
When it is acquired The value of its benefits (increasing cash inflow or reducing outflow) can be measured in a reasonable degree of precision
26
When is a liability recognized?
Obligation based on benefits or services received in the past The amount and timing is reasonably certain
27
What is equation for retained earnings at the end of a fiscal year?
RE(end) = RE(begin) + net income - dividends
28
What happens when a dividend is declared?
1. Not an expense 2. Reduction of retained earnings 3. Creates a liability until paid
29
List the four types of ratios
Liquidity ratios Capital adequacy ratios Asset quality ratios Earnings ratios
30
Define liquidity ratios and characteristics
Current ratio = current assets / liabilities, > 1 desired Quick/acid-test ratio = cash, marketable securities, receivables / current liabilities; > 1 desired, lacks inventory
31
Define capital adequacy ratios
Debt ratio = total liabilities / assets; want around 0.5 Interest coverage ratio = earnings before interest, tax / interest expense; want well above 1
32
Define asset quality ratios
Inventory turnover ratio = cogs / average inventory; how quickly inventory is moving; higher is better Asset turnover ratio = sales / average total assets; how efficiently the comps assets are being used to drive sales; higher is better
33
Define earnings ratios
Ratios to compare different size comps Profit margin/return on sales ratio = net income / sales; higher is better Return on assets ratio = net income / average total assets; higher is better
34
Define return on equity and component ratios
ROE = net income / book value of shareholders equity; how profitably the firm has been able to invest shareholder funds ROE = net profit margins (net income/sales) * asset turnover (sales/assets) * financial leverage (assets/equity)
35
Days receivable formula
365 * average receivables / sales
36
Days inventory formula
365 * average inventory / cost of sales
37
Days payable formula
365 * average payable / cgs
38
Receivable turnover formula
Sales / average receivables
39
Inventory turnover formula
Cgs/ average inventory
40
Payable turnover formula
Cgs / average payables
41
List main components of current assets
Cash, marketable securities, accounts receivable, prepaid expenses, inventory
42
Define net debt to equity ratio
Book value of interest-bearing debt (net of cash) / book value of equity
43
Define interest coverage ratio
Pretax earnings / interest charges
44
Define cash flow coverage ratio
Cash flows / interest charges
45
Define cash and marketable securities to total assets ratio and the type of ratio it is
(Cash + market securities) / total assets Liquidity ratio
46
Define asset turnover ratio
Sales / total assets
47
What is the cost principle?
Principle in asset valuation that assets are generally valued at their historical cost
48
What is capital stock?
The money the company received when selling shares
49
What are revenues?
Value received for goods sold or services preformed
50
What are expenses?
Payment or obligations for goods or services received
51
What is the revenue recognition principle?
Revenue is recognized when the good is delivered for the service is performed
52
What is the Matching principle?
Expenses are matched to the same period as their related revenues or the time period where the expense benefits operations
53
Define operating income
Gross margin/profit - operating expenses