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ACCT 5202 Financial Accounting > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

Decision makers inside company use what type of accounting?

A

Managerial Accounting

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2
Q

Decision makers outside company use what type of accounting?

A

Financial Accounting

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3
Q

What are the four business activities all companies engage in?

A

Plan, Finance, Invest, Operate

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4
Q

What are three external forces affecting a business?

A

Competition, Regulation, Economic/Market Foces

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5
Q

What is another term for the business activity of ‘planning’?

A

Strategy or Business Plan

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6
Q

Define the business activity of investing.

A

Acquiring/disposing of resources to produce/sell goods and services

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7
Q

Define the business activity of financing.

A

Method companies use to fund investments

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8
Q

Define the business activity of operating.

A

Produce, promote, sell goods and services

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9
Q

How is equity financing associated with repayment?

A

Type of financing with no obligation to repay

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10
Q

How is creditor financing associated with repayment?

A

Type of financing with obligation to repay

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11
Q

How is equity financing associated to ownership?

A

Funds contributed by owners along with income retained by company

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12
Q

How is creditor financing associated to ownership?

A

Funds contributed by non-owners and creates liability

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13
Q

What is an asset?

A

Resource acquired by company for future benefit

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14
Q

What is the accounting equation?

A

Assets = Liabilities + Equity

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15
Q

On what financial document is revenue found?

A

Income Statement

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16
Q

On what financial document is expenses found?

A

Income Statement

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17
Q

On what financial document is profit/loss found?

A

Income Statement

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18
Q

What financial document reflects operational performance?

A

Income Statement

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19
Q

What is the most important financial document?

A

Income Statement

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20
Q

What financial document reflects profit/loss over a period of time?

A

Income Statement

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21
Q

On what financial document is assets found?

A

Balance Sheet

22
Q

On what financial document is liabilities found?

A

Balance Sheet

23
Q

On what financial document is equity found?

A

Balance Sheet

24
Q

What financial document reflects the accounting equation of ‘investing = financing + owner financing’?

A

Balance Sheet

25
Q

What financial document reflects balances at a point in time?

A

Balance Sheet

26
Q

What is the second most important financial document?

A

Balance Sheet

27
Q

What financial document reflects liquidity and capitalization?

A

Balance Sheet

28
Q

On what financial document is sources and uses of cash found?

A

Statement of Cash Flow

29
Q

What financial document reflects changes in cash over a period of time?

A

Statement of Cash Flow

30
Q

On what financial document is ‘cash from operations’, ‘cash from investing’, and ‘cash from financing’ found?

A

Statement of Cash Flow

31
Q

What financial document details changes in owner financing?

A

Statement of Stockholder’s Equity

32
Q

What is the second most important financial document?

A

Statement of Stockholder’s Equity

33
Q

What financial document details sale and repurchase of shares?

A

Statement of Stockholder’s Equity

34
Q

What financial document details dividend payments?

A

Statement of Stockholder’s Equity

35
Q

What financial document reflects changes in equity over a period of time?

A

Statement of Shareholder’s Equity

36
Q

On what financial document is contributed capital found?

A

Statement of Stockholder’s Equity

37
Q

On what financial document is retained earnings found?

A

Statement of Stockholder’s Equity

38
Q

How is net income figured?

A

Revenue less expenses

39
Q

What is articulation?

A

Linkage among 4 primary financial statements

40
Q

What links balance sheet to statement of cash flows?

A

Cash

41
Q

What links balance sheet to statement of stockholder’s equity?

A

Stockholder’s Equity

42
Q

What links income statement to statement of stockholder’s equity?

A

Net Income

43
Q

What board monitors quality of financial statements and audits (created by SOX)?

A

PCAOB (Pub Co Acct Oversight Bd)

44
Q

What board established accounting standards?

A

FASB (Fin Acct Standards Bd)

45
Q

Analysis Tool - Return on Equity (ROE) Formula

A

Net Income / Avg stockholder’s equity

46
Q

Analysis Tool - Return on Equity (ROE) Function

A

Profitability; measures ability of company to earn return for stockholders

47
Q

Analysis Tool - Return on Equity (ROE) Target

A

> 10% and increasing over time

48
Q

Analysis Tool - Debt to Equity Ratio (D/E) Formula

A

Total Liabilities / Total stockholder’s equity

49
Q

Analysis Tool - Debt to Equity Ratio (D/E) Function

A

Credit Risk; measures ability of a company to make necessary interest and principal payments

50
Q

Analysis Tool - Debt to Equity Ratio (D/E) Target

A

Equal to 1 indicates that company is using equal parts debt and equity financing

ACCT 5202 Financial Accounting (1 decks)

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