Chapter 4 Flashcards
The components of income from continuing operations are
revenues, expenses (including income taxes), gains, and losses, excluding those related to discontinued operations.
earnings quality
The ability of reported earnings to predict a company’s future earnings
Basic EPS formula
(Net Income - Preferred Dividends) / Weighted average # of common shares outstanding
Diluted EPS
(Net Income - Preferred Dividends) / (Weighted average # of common shares outstanding + adjustment for dilutive effect of potential CS)
Comprehensive Income
Total change in shareholders equity due to nonowner transactions
Net Cash Flows From Operating Activities Formula
Inflow - Outflow
Average collection period
365 days ÷ Receivable turnover ratio
Receivable turnover ratio
Net sales ÷ Average accounts receivable (net)
Return on equity =
(Net income ÷ Average total assets) × Equity multiplier
Profit margin × Asset turnover × Equity multiplier
non-GAAP earnings
actual (GAAP) earnings reduced by any expenses the reporting company feels are unusual and should be excluded.
A gain from discontinued operations will result in an income tax
expense
a loss from discontinued operations will result in an income tax
benefit
impairment loss
is reported if a discontinued operation is held for sale and the book value of the assets is more than the fair value minus cost to sell.
Asset Turnover Ratio
Net Sales/ Average Total Sale
Receivable Turnover Ratio
Net Sales/ Average Accounts Receivable
