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MGT8803 > Balance Sheet > Flashcards

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
Q

When is an asset recognized?

A

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
Q

When is a liability recognized?

A

Obligation based on benefits or services received in the past

The amount and timing is reasonably certain

27
Q

What is equation for retained earnings at the end of a fiscal year?

A

RE(end) = RE(begin) + net income - dividends

28
Q

What happens when a dividend is declared?

A
  1. Not an expense
  2. Reduction of retained earnings
  3. Creates a liability until paid
29
Q

List the four types of ratios

A

Liquidity ratios
Capital adequacy ratios
Asset quality ratios
Earnings ratios

30
Q

Define liquidity ratios and characteristics

A

Current ratio = current assets / liabilities, > 1 desired

Quick/acid-test ratio = cash, marketable securities, receivables / current liabilities; > 1 desired, lacks inventory

31
Q

Define capital adequacy ratios

A

Debt ratio = total liabilities / assets; want around 0.5

Interest coverage ratio = earnings before interest, tax / interest expense; want well above 1

32
Q

Define asset quality ratios

A

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
Q

Define earnings ratios

A

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
Q

Define return on equity and component ratios

A

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
Q

Days receivable formula

A

365 * average receivables / sales

36
Q

Days inventory formula

A

365 * average inventory / cost of sales

37
Q

Days payable formula

A

365 * average payable / cgs

38
Q

Receivable turnover formula

A

Sales / average receivables

39
Q

Inventory turnover formula

A

Cgs/ average inventory

40
Q

Payable turnover formula

A

Cgs / average payables

41
Q

List main components of current assets

A

Cash, marketable securities, accounts receivable, prepaid expenses, inventory

42
Q

Define net debt to equity ratio

A

Book value of interest-bearing debt (net of cash) / book value of equity

43
Q

Define interest coverage ratio

A

Pretax earnings / interest charges

44
Q

Define cash flow coverage ratio

A

Cash flows / interest charges

45
Q

Define cash and marketable securities to total assets ratio and the type of ratio it is

A

(Cash + market securities) / total assets

Liquidity ratio

46
Q

Define asset turnover ratio

A

Sales / total assets

47
Q

What is the cost principle?

A

Principle in asset valuation that assets are generally valued at their historical cost

48
Q

What is capital stock?

A

The money the company received when selling shares

49
Q

What are revenues?

A

Value received for goods sold or services preformed

50
Q

What are expenses?

A

Payment or obligations for goods or services received

51
Q

What is the revenue recognition principle?

A

Revenue is recognized when the good is delivered for the service is performed

52
Q

What is the Matching principle?

A

Expenses are matched to the same period as their related revenues or the time period where the expense benefits operations

53
Q

Define operating income

A

Gross margin/profit - operating expenses

MGT8803 (8 decks)

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