Chapter 3/4 Flashcards
What are data analytics?
is the process of analyzing enormous amounts of data to find patterns and correlations, trends, and other valuable insights to enhance decision -making
What are profitability ratios?
measure the income or operating success of a company for a given period of time
What are liquidity ratios?
measure the short-term ability of a the company to pay its maturing obligations and to meet unexpected needs for cash
What are solvency ratios?
measure the ability of the company to survive over a long period of time
What is the equation for working capital and what does it show?
WC = CA - CL
a measure of liquidity used to evaluate a company’s short-term debt-paying abilities
What is the current ratio?
CR = CA/CL
measure of a company being able to meet short-term obligations
What is the debt to total assets ratio and what does it show?
DTTA = TL / TA
A measure of solvency showing the percentage of total financing that is provided by lenders and other creditors
What is the basic earnings per share and what does it show?
BEPS = income available to common shareholders / weighted average number of common shares
a measure of profitability showing the income earned by each common share
What is the price-earnings ratio and what does it show?
PER = market price per share / basic earnings per share
it reflects investors’ beliefs about a company’s future income potential
What is the going concern assumption?
the assumption that the business will remain in operation for the foreseeable future
What is the historical cost basis of accounting?
measurement basis that states that assets and liabilities should be recorded at their cost at the time of acquisition
What is fair value?
an estimate of the price a company would pay to purchase an asset or settle a liability today with arms’-length parties under normal business conditions
What are the three ratio classifications?
- Intracompany
(two or more periods for the same company)
-Intercompany
(a comparison with a competitor in the same industry)
- Industry Average
comparisons to average ratios for the industry that a company operates in
What are the two types of shares?
Preferred shares – priority payment @ fixed amount (only get paid 4%)
Common shares – last to be paid, but receive residual profits (paid the rest after preferred shares)
What is the accounting cycle?
- Analyze Transactions
- Journalize
- Post
- Trial Balance
- Adjusting Entries
- Adjusting Trial Balance
- Financial Statements
- Closing Entries
- Post Closing Trial Balance
