Chapter 1 Flashcards
Financing activities:
Borrowing or paying back money to lenders and receiving additional funds from stockholders or paying hem dividends
Investing activities:
buying or selling items such as plant and equipment used in the production of beverages
Operating activities:
The day to day process of purchasing raw tea and other ingredients from suppliers, manufacturing beverages, delivering them to costumers, collecting cash from costumers, and paying suppliers.
Balance sheet:
Company reports the economic resources it owns and the sources of financing for those resources
Income statement:
Company reports its ability to sell goods for more than their cost to produce and sell
Statement of stockholders equity:
Company reports additional contributions or payments to investors and the amount of income the company reinvested for future growth
Statement of cash flows:
Company reports its ability to generate cash how it was used
Four financial statements are normally prepared by profit making organizations for use by investors, creditors, and other external decision makers:
- Balance sheet
- Income statement
- Statement of stockholders equity
- Statement of cash flows
Assets:
Economic resources (e.g., cash, inventory, buildings)
Liabilities:
Financing from creditors (e.g., amounts owed to suppliers, employees, banks)
Stockholders’ equity:
Financing from stockholders (e.g., common stock, retained earnings)
What items appear on a balance sheet?
- Liabilities
- Assets
- Stockholders equity
Owner gives $5,000 cash to his company in exchange for stock. This will increase company’s:
Cash and total stockholders equity
Profits that have accumulated in the company over time are called:
Retained earnings
Which financial statement is a company’s primary measure of profit?
Income statement
