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GE 348 > Bussiness and Accounting > Flashcards

Bussiness and Accounting Flashcards

1
Q

What are assets?

A

Assets:thingsofvalueownedbythebusiness(cash,
machines,buildings,etc.).Assetshavevaluebecausea
businesscanuseorexchangethemtoproducetheservice
orproductofthebusiness

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2
Q

what are liabilities?

A

debtsownedbyabusiness.Businessestypically
incurliabilitiesbyborrowingmoneyfrombanksorothers
andpurchasingfromsuppliersoncredit

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3
Q

What is equity?

A

Thevalueofthebusinessorcorporation.This
includesretainedearningsofthecompanysinceitwas
establishedandcanbeownedbyanindividualoragroup
bysellingshares

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4
Q

Current vs Long term assets

A

CurrentAssets:thoseresourcesthattheentityexpectstoconverttocashduringthenextfiscalyear
– Ex:cash,cheques,moneyorders,short‐terminvestments, accountsreceivableduetobecollectedwithinoneyear,
merchandiseinventorythatisexpectedtobesoldwithin one year

Long‐termassets:(non‐currentassets)– assetsthatwillbe
usefulformorethanoneyear
– Ex.Property,plantandequipment(referredtoasPPE),long‐
terminvestments,non‐tangibleassets(copyrights,patents,etc)

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5
Q

What are the 3 main financial statements?

A
  1. Balance Sheet
  2. Income Statement
  3. Cash Flow Statement
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6
Q

What is the purpose of balance sheet?

A

Demonstrate the financial position of the company at a certain point.
Shows: Assets, Liabilities, and equity

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7
Q

What does an income statement do?

A

Measures the profit of a company during a certain time or period. Prepared more frequently such as quarterly.

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8
Q

What does a statement of cash flow show?

A

Showsthecompany’sgenerationanduseofcashoverthe reportingperiod(usually1year)
Includesonlycashinflowsandoutflows
Reportsontheentity’sinvestingandfinancingactivities
fortheperiod

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9
Q

5 categories of financial ratios?

A 
DebtManagementAnalysis (Financing)
LiquidityAnalysis
AssetManagementAnalysis(Activity)
ProfitabilityAnalysis(Performance)
MarketValueAnalysis
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10
Q

what is debt ratio?

A

Relationship between total liabilities and the total assets

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11
Q

Liquidity is the ability to meet short term financial commitments, what ratio is used to analyze liquidity?

A

Current ratio and quick ratio

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12
Q

Theabilitytosellinventoryandcollectonaccountsreceivableisfundamentaltobusinesssuccess, this is asset management. What ratios evaluate asset management?

A

Inventory Turnover and Day Sales Outstanding

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13
Q

Common ratios used to analyze profits?

A

Profit margin, return on assets, and return on equity

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14
Q

Whenlookingtoinvestinacompanyyoulookatthe look at the potential for a return, which is?

A

Gains- sell stock at higher price than bought.

Dividends: period payments from the company you own stock.

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15
Q

Two ratios used to compare market value?

A

Price to earning ratios and book value per share

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16
Q

What is proprietorship?

A

Business entity owned by one person

Not a separate legal entity: profits are reported on the owners income return

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17
Q

What is partnership?

A

Business owned by 2 or more individuals

profits are reported on the owners personal tax returns

18
Q

Corporation taxes

A

Business owned by a shareholder

Files for its own tax return

19
Q

What causes depreciation?

A

Physical depreciation- deterioration

Functional depreciation- obsolescence

20
Q

Cause of physical depreciation?

A

Wear and tear

Deterioration from environment

21
Q

Causes functional depreciation?

A

Assets’s services no longer needed
Technology is obsolete
Asset meet new standards

22
Q

Economic depreciation is?

A

The change in market value of asset. Both physical and functional depreciation are causes

23
Q

What is considered depreciable property?

A

Mustbeusedinthebusinessorbeheldfortheproductionof income
Musthaveadefiniteservicelife(longerthanoneyear)
Mustbesomethingthatwearsout,decays,getsusedup,
becomesobsolete,orlosesvaluefromnaturalcauses

24
Q

Depreciable property includes?

A

Buildings, Machinery, equipment, and vehicles.

25
Q

Two types of depreciation method?

A

Book method used for financial statements and tax method used to determine taxes.

26
Q

The methods within book depreciation method?

A

Straightline-drops equal value
Declining- realizes more value gained in early years
Units of production-determine amount of units produced by a machine.

27
Q

What is the first year rule and what does it apply too?

A

In the first year only half of the cot of asset gets added to the CCA class

28
Q

What are a manufacturing costs?

A

Direct material- material used to make final product
Direct labor- labor costs to build products
Manufacturing overhead-all costs except above direct costs

29
Q

Nonmanufacturing costs?

A

Marketing costs and Administrative

30
Q

Unit of measure to define the level of activity of the company includes

A 
–Numberofunitsproduced
 Numberofmachinehoursused
 Tonsofproductprocessed
Kilowatthoursofenergyproduced
 Numberofmilesdriven
31
Q

What is contribution margin?

A

The contribution that each unit of production makes towards absorbing fixed costs and profit.

32
Q

The firms income generating activities is? ie sales, production, finished goods

A

Operating budget

33
Q

The inflow and outflow of cash and overall financial position of the company is?

A

Financial Budget

34
Q

What is static budget?

A

Budget for a particular level of an activity

35
Q

What is a flexible budget?

A

provides a company with the capability to compute expected costs and revenues for a range of activities.

36
Q

Activity flexible budgeting is?

A

The prediction of what activity costs will be as activity output changes

37
Q

What does static and flexible budgets gauge?

A

Static- effectiveness

Flexible- efficiency

38
Q

What is an incremental budget?

A

Existingoperationsandcurrentbudgetallowancefor
existingactivitiesareusedasthestartingpointfor
preparingthenextannualbudget

39
Q

Advantages and Disadvantages of incremental budgets?

A

Advantages include : simple and suited to direct production and service costs
Disadvantages: inefficiencies are carried forward majority of the budget remains unchanged.

40
Q

Zero-Base budget is?

A

Previous budget isn’t used as a basis

Activities are justified and prioritized before decisions.

41
Q

Advantages of zero base budget?

A

based on need & benefit
funding isn’t taken for granted
focuses outputs in relation to value for money.

GE 348 (4 decks)

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