Chapter 4 Flashcards
Revenue after adjustments
Net revenue
The amount of income earned during a period per share of common stock
Earnings per-share
The net amount of cash provided from operating activities
Operating cash flow
With reference to the presentation of expenses and income statement, the grouping together of expenses by similar nature.
Grouping by nature
Sales minus the cost of sales
Gross profit
With respect to the format of the income statement, a format that presents a subtotal for gross profit
Multi step format
With respect to the format of the income statement, a format that does not subtotal for gross profit
Single step format
A company’s profits on its usual business activities before deducting taxes
Operating profit
A contract that spans a number of accounting periods
Long term contract
A method of revenue recognition in which, in each accounting period, the company estimates what percentage of the contract is complete and then reports the percentage of the total contract revenue in its income.
Percentage of completion
A method of revenue recognition in which the company does not recognize any revenue until the contract is completed; used particularly in long term construction contracts.
Completed contracts
A method that specifies that the portion of the total profit of the sale that is recognized in each period is determined by the percentage of the total sales price for which the seller has received cash
Installment period
Seller does not report any profit until the cash amounts paid by the buyer a greater than all the sellers costs for the merchandise sold
Cost recovery method
The last in, first out, method of accounting for inventory.
LIFO method
The process of systematically allocating the cost of long-lived assets to the period during which the assets are expected to provide economic benefits
Depreciation
The process of allocating the cost of intangible long-term assets having a finite useful life to accounting periods
Amortization
Equity shares that are subordinate to all other types of equity
Ordinary shares
The ratio of gross profit to revenues
Gross profit margin
An indicator of profitability calculated as net income divided by revenue; indicates how much of each dollar of revenues is left after all costs and expenses
Net profit margin
A profitability ratio calculated as operating income divided by revenue
Operating profit margin
A type of security that represents an ownership interest in a company
Common shares
The first in, first out method of accounting for inventory
FIFO
An indicator of profitability, calculated as net income divided by revenue; indicates how much of each dollar of revenue is left after all costs and expenses
Return on sales
Assets that are expected to provide economic benefits over a future period of time, typically greater than one year
Long-lived assets
A depreciation method that allocates evenly the cost of a long lived asset less its estimated residual value over the estimated useful life of the asset
Straight line method
The EPS that would result if all dilutive securities were converted into common shares
Diluted EPS
Net earnings available to come shareholders divided by the weighted average number of common shares outstanding
Basic EPS
Securities held for company with the intent to trade them
Traded securities
The financial statement that presents an entities current financial position by disclosing resources the entity controls in the claims of those resources as of a particular point in time
Balance sheet
