FAR 30 Flashcards
How do you calculate the PE ratio
price / earning
price - market price ($12)
earnings per share = net income / number of C/S shares outstanding
240,000/ 300,000share = .80
so ratio = 12 : .80 or 15:1
What is the effect of refinancing a long-term mortgage with a short term note - Current ratio
Increases current liabilities without increasing current assets = increase in Current ratio
What is the effect of collecting a short -term A/R - current ratio
This has no effect on current asset or current ratio
What is the affect of paying 20,000 of short-temr A/P current ratio
decreases current liability and current asset by same amount = decreasing Current ratio
what is the effect of purchasing 50,000 of merchandise inventory with a short term A/P
increase in asset and liability in same amount = increase in Current ratio
How does a current ratio of .5: 1 increase
A current ratio of 0.5:1 will increase if current assets are increased by more than 1/2 of any increase in current liabilities, or if current liabilities are decreased by at least 2 times a decrease in current assets.
Refinancing a long-term mortgage with a short-term note increases current liabilities without an increase in current assets, thus decreasing the current ratio.
Paying a short-term account payable decreases current liabilities and current assets by the same amount, also decreasing the current ratio.
Collecting a short-term account receivable has no effect on current assets and no effect on the current ratio.
Purchasing inventory with a short-term account payable increases current assets by the same amount as the increase in current liabilities, thus increasing the current ratio.
Which F/S provide the best info about liquidity
balance sheet
How do you calculate times preferred dividends
ratio of Total Earnings to Total preferred dividends
480,000 : 200,000 = 2.4:1
Total earning is net income
How is average inventory per day calculated
365 / inventory turnover
or
average inventory / inventory sold per day
When is a business segment classified as a reportable segment
when is has 10% of combined revenue, profit or total assets of the company.
You just need one of these to qualify
This is total revenue for all segments
- customers and to otters segments
- NOT include interest earned
When you transfer to IFRS when do you start? When is your first date of transition
It is the earliest statement of financial position presented in IFRS format.
So if you decide on July 1 X2
Must prepare the B/S in IFRS starting 1/1/X1 because IFRS require two years I/S and three year B/S
B/S: 1/1/X1, 12/31/X1, and 12/31/X2 so
1/1/X1 is the start
What are considered selling expenses and General and admin expenses
General and Administrative expenses: - not directly related to generation of revenue - accounting and legal officers salaries -insurance
Selling expenses:
- freight out
- sale rep salaries
What is concentration of credit risk
This is when you have many customers with a shared characteristic so if one has a factor that inhibits its ability to pay - it will affect other’s as well
- same industry
- same market
What is an off balance sheet risk of loss
this happens when there are assets and liabilities not on the B/S that may result in a loss
What is a concentration of market risk
- this is when you multiple assets that have a value on the based on similar market criteria -
- interest rate
so a change in interest rates will affect ill affect all similar investments
