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Accounting > Exam 4 > Flashcards

Exam 4 Flashcards

1
Q

noncash activities

A

activities that do not directly pay or receive cash

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2
Q

example of noncash activities

A

A company that takes out a loan for a piece of equipment

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3
Q

What are the 3 types of cashflows

A

1.Operating
2.Investing
3.Financing

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4
Q

Operating Activities include…

A

-The calculation of and including net income
-Normal operations

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5
Q

Examples of Operating Activities include (6 things)

A

-Change in AR, Inventory, Prepaids
-Change in AP and Unearned Revenue
-Interest Receivables
-Gains and Losses
-Depreciation Expense
-Interest Expense

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6
Q

Investing activities include…

A

-Purchase or sale of PP&E
-Company investing in someone else

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7
Q

Examples of investing activities include… (4 things)

A

-Change in PP&E
-Change in Intangible Assets
-Change in short term investments
-Change in Notes Receivables (buying a bond)

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8
Q

Financing Activities include…

A

-Contribution from or distributions to owners
-Someone else investing in the company (someone invests in me)

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9
Q

Examples of financing activities include…(4 things)

A

-Dividends
-Common, Preferred, Treasury Stock
-Bonds Payable
-Short term and long-term notes payable

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10
Q

Classification and (+-) for:
Collection of AR

A

Operations, (+)

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11
Q

Classification and (+-) for:
Issuance of Bonds

A

Financing,(+)

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11
Q

Classification and (+-) for:
Purchase of new equipment

A

Investment, (-)

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12
Q

Classification and (+-) for:
payment of dividends

A

Financing , (-)

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13
Q

Classification and (+-) for:
Receipt of interest on loan receivables

A

Operating,(+)

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13
Q

Classification and (+-) for:
Receipt of principal of loan receivable

A

Investing (+)

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14
Q

Formula for calculating total change in cash:

A

Operating + Investing + Financing

15
Q

Ending Balance of Cash formula:

A

Beginning balance of cash + Total change in cash

16
Q

In the Statement of cash flows, where is Net Income located? (Operating, Investing, Financing)

A

Operating Activities

17
Q

Quality of Income Ratio:

A

Cash flow from operations / Net Income

18
Q

Do you want the Quality of income ratio to be low or high?

A

High

19
Q

What does the quality of income ratio explain?

A

how much each dollar of NI generates

20
Q

What is the SEC?

A

Securities and exchange commission
-govern publicly traded companies
-enforce the GAAP

21
Q

what is GAAP?

A

Generally accepted accounting principals
-written by FASB

22
Q

what is the FASB?

A

Financial Accounting Standards Board
-wrote the GAAP

23
Q

what is the AICPA?

A

American Institute of Certified Public Accountants

24
Q

what is the PCAOB?

A

Public Company Accounting Oversight Board
-oversee accounting professionals who provide independent audit reports for publicly traded companies

25
Q

Common external professional services include: (3)

A

-Auditors
-Tax Professionals
-Advisors

26
Q

What are the 3 conditions for fraud to occur?

A
  1. Incentive
  2. Opportunity
  3. Rationalization
27
Q

Net Profit Margin

A

Net Income / Net Sales

28
Q

Total Asset TO

A

Net Sales / Avg Total Assets

29
Q

Return on Assets

A

Net Income / Average Total Assets

30
Q

Financial Leverage

A

Avg Total Assets / Avg Total SE

31
Q

Return on Equity

A

Net Income / Avg Total SE
- Want to be low

32
Q

DuPont Model

A

(Net Profit Margin * Total Asset TO) * Financial Leverage = ROE

33
Q

Quick Ratio

A

(Cash and Cash equivalents + Net AR + Short Term Investments) / Current Liabilities

34
Q

Cash Ratio

A

Cash and Cash Equivalents / Current Liabilities
-Want it to be high

35
Q

Time Interest Earned

A

(Net Income + Interest Expense + Income Tax Expense) / Interest Expense
-Want it to be high

36
Q

Cash Coverage Ratio

A

Cash flow from Operating activities / Interest Paid
-Want it to be high

37
Q

Debt to equity ratio

A

Total Liabilities / Total Stockholder Equity
- want this to be low

Accounting (6 decks)

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