FINAL REVIEW Flashcards
What goes on an Income Statement
Revenues and Expense
What goes on the statement of retained earnings?
Net Income, Dividends, Beginning Retained Earnings
What goes on the balance sheet?
Assets, Liabilities, Stockholders Equity
What Goes on the Statement of Cash Flows?
Cash Inflows and Outflows
How do you calculate the Current Ratio?
Current Assets/Current Liabilities
How do you calculate net profit margin?
Net Income/Revenues
What are the three sides to the Fraud Triangle?
Incentive, Opportunity, Rationalization
What are the counteracts to the fraud triangle?
Counteract incentives, Reduce Opportunities, Encourage Honesty
What are some reconciling differences that your bank may not know about?
Errors made by the bank, Time Lags in deposits/checks you made recently
What are some reconciling differences that you may not know about?
Interest the bank has put into your account, Electronic funds transfers (EFTs), Service charges taken out of your account, Customer checks you deposited for which the customer had non-sufficient funds (NSF), Errors you made
How do you calculate Cost of Goods Sold using a Periodic Inventory System?
Beginning Inventory + Purchases - Ending Inventory
How do you calculate ending inventory?
Beginning Inventory + Purchases - Cost of Goods Sold = Ending Inventory
FOB Shipping Point
The Seller is responsible until the delivery leaves the warehouse
FOB Destination
The Seller is responsible until the delivery arrives to the Buyer.
How do you interpret these credit terms: 2/30, n/60
2 percent discount is offered if paid in the first 30 days, the net purchase is due in 60 days.
How do you calculate Gross Profit Percentage?
(Net Sales - Cost of Goods Sold)/Net Sales * 100
FIFO
to calculate cost of inventory, price cost of goods sold based on the oldest to newest inventory first
LIFO
Use the newest to oldest inventory at its cost to calculate cost of inventory
Weighted Average cost
COGS Available for Sale / Number of Units Available for Sale
Inventory Turnover Ratio
Cost of Goods Sold / Average Inventory
Days to Sell
365 / Inventory Turnover Ratio
How do you calculate interest?
Interest = Principal (P) * Interest Rate (R) * Time (T)
Straight-Line Formula
(Cost - Residual Value) * (1/Useful Life) = Depreciation Expense per year
Units of Production Formula
(Cost - Residual Value) * Actual Production This Period / Estimated Total Production = Depreciation Expense
Double-Declining-Balance Formula
(Cost - Accumulated Depreciation) * 2/Useful Life = Depreciation Expense
Fixed Asset Turnover Ratio
Net Revenue / Average Net Fixed Assets
Bonds issue at a premium when…
Stated Interest Rate > Market Interest Rate
Bonds issue at a discount when…
int. rate < market int. rate
Debt to asset ratio
total liabilities/total assets
Times interest earned ratio
(Net Income + Interest Expense + Income Tax Expense) / Interest Expense
Earnings Per Share (EPS)
(Net Income - Preferred Dividends) / Avg. # of common shares outstanding
Return on Equity (ROE)
(Net Income - Preferred Dividends)/Avg Common Stockholder’s Equity
Price/Earnings (P/E) ratio
Current Stock Price (per share)/Earnings per Share (annual)
Operating Cash Inflows
Cash provided by:
Collecting from customers
Receiving dividends
Receiving interest
Operating Cash Outflows
Purchasing services and goods for resale
Paying salaries and wages
Paying Income Taxes
Paying Interest
Investing Cash Inflows
Sale/Disposal of Equipment
Sale or Maturity of Investments in Securities
Investing Cash Outflows
Purchase of Equipment
Purchase of investments in securities
Financing Cash Inflows
Borrowing from lenders through formal debt contracts
Issuing Stock to owners
Financial Cash Outflows
Repaying Principal to Lenders
Repurchasing stock from owners
Paying Cash Dividends to Owners
