Chapter 5 Flashcards
What is included in the assets section of classified financial statements?
Current assets, investments, property plant & equipment, and Intangible assets.
What is it called when assets can be quickly turned into cash?
Order of liquidity (which is used in the classified balance sheet).
What are intangible assets?
Long-term assets with NO physical substance.
What is partnership owner’s equity called?
Partners’ equity.
**, Capital + **,Capital = Total Partners’ equity
What is a corporation’s equity called in the balance sheet?
Stockholders’ equity (it has two parts contributed capital and retained earnings.)
Contributed capital/Paid-in capital account..
Reflects the amount of assets invested by stockholders.
Define dividends.
Distribution of assets to shareholders.
What is the formula for working capital?
Current assets - Current Liabilities.
This is when current assets exceed current liabilities.
How to calculate current ratio?
Current assets/Current liabilities.
What is profitability?
The ability to earn a satisfactory income.
How to calculate profit margin?
Net income/Revenues
What does the asset turnover ratio measure?
It measures how efficiently assets are used to produce sales.
How to calculate asset turnover?
Revenues/Average total assets
How to calculate the debt to equity ratio?
Total liabilities/Total equity
IMPORTANT NOTE!!
Anything Receivable is a current asset.
Anything Payable is a current liability or long term liability depending on how long does it need to be paid.
