Exam 3 Flashcards
Net Profit Margin
Net income/sales
Market to book value
Market capitalization/book value
#of shares outstandingxshare price)/(Assets-Liabilites
Working capital
Current assets-current liabilities
Current ratio
Current ratio/current liabilities
Debt to equity
Total liabilities/total equity
Return on assets (short)
Net income/average total assets
Return on assets (long)
Net profit margin x total asset turnover
Fixed asset turnover ratio
Net sales/Average net fixed assets
Price to earnings ratio
Market value per share/Earnings per share
Return on equity
Net income/stockholders equity
Gross profit
Sales-COGS
Gross Profit Margin
Sales-COGS/Sales
EPS
Net income/average number of shares outstanding
The declaration and payment of a cash dividend
Reduces both assets and retained earnings by the amount of the dividend
Cash flows from operating
Related to production and delivery of goods and services, interest expense, interest income
Cash flowsfrom investing
Puchasing amd disposing of long term assets, investments, loans to others
Cash flows from finacing
Issuing or buying back stocks or bonds, paying dividends, borrowing cash
Additional paid in capital
(Sales price x number of shares sold)-common stock at par
Common stock at par
Par value x number of shares sold
Accrued liabilites
Onligations related to expenses that have been incurred but will not be paid until the subsequent period
When should accrued liabilites be recodered
When earned
Calculate interest
Principal x interest rate x time
Contingent liabilites
Potential liablities; may or may not become an actually liability
Account for probably measurable contigent liablility
Arrrue loss on income statement and balance sheet
Accounting for probably not measurable
Disclose in footnotes
Accounting for reasonably possible measureable and not measurable
Disclose in footnotes
Accounting for remote
Do nothing
Annuities
Equal amount of money for interest for each period, interest period of equal length, equal interest rate for each period
Bonds
Are securities issued by a firm to others to get large amounts of cash
Bond issuer
Firm selling bond to borrow money
Bondholder
The owner of the bond
Face value/par value/principal amount
Amount to be paid at maturity by the issuer to the holder
Stated rate of interest/cupon rate/contract rate/nominal rate
Interest rate used to calculate interest payment made periodically by issuer to holder
Cupon payment
Periodic interest payment
Stated rate x face value
Market rate of interest/yield/effective interest rate
The interest rate the market demands on the bond
Bonds sold at discount if
Stated rate is less than market rate
Bonds sold at premium if
Stated rate is greater than market rate
To determine discount
Use market rate
Amortization of discount does what to balance?
Increases
Discount does what to netbook value
Decreases
Present value of annuity to calculate what?
Interest
Present value to calculate
Selling price
Amortization of premium does what to balance
Decreases
What is used to calculate interest expense
Market rate
Premium does what to net book value
Increases
Issuance of no par value common stock
Increase common stock for the total amount raised
Treasury stock
Stock that the issuing firm reaquires from existinf shareholders
Preferred stock
Pay a fixed dividend ratio
Cash flows equation
(All change in)
Cash=liabilites-noncash assets+equity
Why use ESO
Alliging incentives, conserve cash, used to be accounting friendly
Intrinsic value of the ESO
Stock price- exercise price
US GAAP
More standards, less flexibility, rules based
IFRS
Fewer standards, more choices, principals based
