financial accounting

Question 1

bond purchasers perpsective

Answer 1

investment (specifically a debt security investment)

Question 2

what do people obtain from bonds

Answer 2

interest revenue

Question 3

own 20-50% of a company’s stock

Answer 3

significant influence

Question 4

when you have controlling influence what method do you use?

Answer 4

consolidate method

Question 5

what do you do in the consolidate method

Answer 5

absorb financial statement into mine

Question 6

debt securities

Answer 6

investing in bonds

Question 7

when you have significance influence what method is used?

Answer 7

equity method

Question 8

what do you do in the equity method?

Answer 8

% of net income into my financial statement

Question 9

primary reason to invest into equity sequrity

Answer 9

receive dividend payment

Question 10

how do we account for equity securities

Answer 10

depends on the degree and level of influence

Question 11

future value

Answer 11

what an amount will grow to be

Question 12

annuity

Answer 12

series of equal payment

Question 13

bond issuers perspective

Answer 13

liability

Question 14

own 0-20% of stock in another company

Answer 14

insignificant influence

Question 15

own 50% or more of the stock

Answer 15

controlling influence

Question 16

why do we invest in bonds

Answer 16

to get interest revenue

Question 17

equity securities

Answer 17

owning stock of another company

Question 18

why do we have equity securities

Answer 18

to earn money from dividend and buy low/ sell high

Question 19

earnings quality

Answer 19

the ability of reported net earnings (NI) to predict a company’s future earning

Question 20

compound interest

Answer 20

interest earned on previous interest and principle

Question 21

liquidity

Answer 21

ability to pay short term debt/liab, most common

Question 22

horizontal analysis

Answer 22

trends/changes for one specific company over time

Question 23

formula for horizontal analysis

Answer 23

(current year - prior year) / prior year

Question 24

when do you use vertical analysis

Answer 24

comparing one company to another regardless of size

Question 25

conservative accounting practice

Answer 25

more expenses, Less net income... less assets, more liabilities

Question 26

earnings persistance

Answer 26

items that won't continue/persist over time

Question 27

future value

Answer 27

how much an amount today will grow to be in the future

Question 28

present value

Answer 28

the value today of receiving some amount in the future

Question 29

aggressive accounting practice

Answer 29

less expenses, more net income ... more assets, less liabilities

Question 30

3 ways to analyze a financial statement

Answer 30

vertical, horizontal, ratio

Question 31

vertical analysis in the balance sheet

Answer 31

express everything as a % of total assets

Question 32

vertical analysis in the income statement

Answer 32

express everything as a percent of sales

Question 33

example of earning persistence

Answer 33

companies net income increasing due to them selling land

Question 34

simple interest

Answer 34

interest only earned on the principle

Question 35

definition of current ratio

Answer 35

companies ability to pay short term debt

Question 36

which ratio is the most common

Answer 36

current ratio

Question 37

current ratio equation

Answer 37

current assets / Current liabilities

Question 38

what does the gross profit ratio indicate?

Answer 38

the portion of each dollar of sales above the cost of goods sold

Question 39

what does the debt to equity ratio relate to

Answer 39

relates to the solvency or a company's ability to pay its long term liabilities

Question 40

debt to equity ratio

Answer 40

total liabilities / SHE

Question 41

what does price earnings ratio do?

Answer 41

compares a companys share price with its earnings per share

Question 42

gross profit ratio

Answer 42

gross profit / net sales

Question 43

one way to think of the price to earnings ratio

Answer 43

the investors expectation of earning growth

Question 44

price earnings ratio

Answer 44

stock price / earnings per share

Question 45

what method is used when you have insignificant influence

Answer 45

fair value method

Question 46

On equity securities, how can you earn returns?

Answer 46

through capital appreciation of the stock and receiving dividends

Question 47

On debt securities how can you earn returns

Answer 47

through periodic interest payments and receiving the principal payment at maturity

Question 48

In the SHE how do you find Total PIC

Answer 48

Preffered stock + Common stock + ADPIC

Question 49

How do you find ending retained earnings

Answer 49

Beginning RE + Net income - Dividends

Question 50

How do you find total SHE

Answer 50

Total PIC + End RE - Treasury Stock

Question 51

How do you find Net sales

Answer 51

Sales Revenue - Sales discounts - sales returns - sales allowance

Question 52

how do you find Gross profit

Answer 52

Net sales - Cost of goods sold