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Quiz > Financial Analysis and Reporting > Flashcards

Financial Analysis and Reporting Flashcards

1
Q

Applies multiple times the straight-line rate to the declining book value (cost minus accumulated depreciation) to achieve a declining depreciation charge over the estimated life of the asset.

A

Declining-Balance Method

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2
Q

measures firm’s ability to pay its current liabilities with its most liquid assets.
- Expressed as times (X

A

Quick (acid test) ratios

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3
Q

Deduction from the original value of the fixed assets.

A

Depreciation

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4
Q

information is material if its omission or misstatement
could influence economic decisions.

A

Materiality Concept

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5
Q

The depreciation expense declines steadily over the estimated life of the asset. This method takes a fraction each year times the cost less salvage value.

A

Sum-of-the-years’-Digits Method

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6
Q

Types of Intangible Assets (5)

A

Trademarks
Patents
Copyrights
Goodwill
Franchise

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7
Q

Who demand for financial accounting information (7)

A
  1. Managers and Employees
  2. Investors and Analysts
  3. Creditors and Suppliers
  4. Stakeholders and Directors
  5. Regulatory and Tax Agencies
  6. Customers and Potential Strategic Partners
  7. Other decision makers
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8
Q

Assets that do not physically exist.

A

Intangible Assets

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9
Q

It is a form of business organization that has unlimited liability and limited life (2)

A

Sole proprietorship
Partnership

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10
Q

How many incorporators does corporation have?

A

atleast 5-15 incorporators

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11
Q

Ratio Analysis interpretable in comparison with: (4)

A

Prior ratios
Ratios of competitors
Industry Ratios
Predetermined Standards

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12
Q

involve income statement items.

A

Operating Activities

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13
Q

Effort of the firm to create sales, includes advertising, sales
commissions, sales supplies used.

A

Selling

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14
Q

EBT meaning

A

Earnings Before Taxes

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15
Q

is the process of allocating the cost of buildings and machinery over the periods benefited.

A

Depreciation

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16
Q

3 Factors to consider when computing depreciation

A

Asset Cost
Length of the life of the asset
Salve value when retired from service

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17
Q

logical reasoning in the form of a set of broad principles. It comprises the Conceptual Framework and Philippine
Financial Reporting Standards (PFRS)

A

Accounting Theory

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18
Q

It answers the question: Does the amount of each type of asset seem reasonable, too high, or too low in view of current and projected sales?

A

Asset Management Ratios

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19
Q

It is a form of business organization that has a limited liability and unlimited life

A

Corporation

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20
Q

all of the concepts of a complete set of financial
statements are interrelated.

A

Concept of Articulation

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21
Q

Methods to compute depreciation (4)

A

Straight-Line Method
Declining-Balance Method
Sum-of-the-years’-Digits Method
Unit-of-Production Method

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22
Q

A statement of a firm’s position at a specific point of time

A

Statement of Financial Position
Balance Sheet

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23
Q

It is a form of business organization that has more government regulations

A

Corporation

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24
Q

Frequently refer as Statement of Operations, Statement of
Income, Statement of Earnings.

A

Income Statement

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25
Q

assets that are expected to be converted to cash within a year. Listed in order of liquidity

A

Current Assets

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26
Q

2 Users of Financial information

A

Internal decision maker (management)

External decision makers

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27
Q

This follows GAAP and comes first before financial management

A

Accounting

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28
Q

Types of Current Liabilities

A

Payables
- Accounts Payable
- Wages Payables
- Taxes Payables
Unearned Income
Other Current Liabilities

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29
Q

Cost of Goods sold is equal to beginning inventory plus
purchases minus ending inventory

A

Retailing Firm

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30
Q

A statement that shows by how much a firm’s equity changed during the year and why this change occurred.

A

Statement of Stockholders’ Equity

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31
Q

measures operating income per amount of sales.

A

operating margin

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32
Q

Objectives of financial statements (4)

A
  1. Providing Information for Economic Decisions
  2. Providing Information about Financial Position
  3. Providing Information about Performance of an Enterprise
  4. Providing Information about Changes in Financial Position
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33
Q

Money owed to a company by customers for products
or services provided on credit.

A

Accounts Receivable

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34
Q

Reports that summarize important financial accounting information about the
business.

A

Financial Statements

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35
Q

2 major parts of stockholders’ equity

A

Contributed Capital
- Common stock
- Preferred Stock
Retained Earnings

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36
Q

Reported as Net in the Income Statement

A

Sales (revenue)

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37
Q

Depreciation to the output capacity of the asset, estimated for the life of the asset.

A

Unit-of-Production Method

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38
Q

reports on a company’s performance over a period of time and lists amounts for revenues, expenses and other
comprehensive income.

A

Statement of Comprehensive Income

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39
Q

Show relationship of a firm’s cash and other current assets to its current liabilities.

A

Liquidity Ratios

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40
Q

each accountable event is recorded in two parts.

A

Double-enttry system

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41
Q

2 Types of accounting information for the users:

A

General Purpose Accounting Information

Special Purpose

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42
Q

It is called the “Language of the Business.”

A

Accounting

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43
Q

It is a form of business organization that has unlimited capital

A

Corporation

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44
Q

Types of liquidity ratio (3)

A

current ratio
quick (acid test) ratio
cash ratio

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45
Q

Represents a company’s net worth.

A

Stockholders’ Equity

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46
Q

Financial Statement Analysis technique that shows changes
in the amounts of corresponding financial statement items over a period of time. Useful tool to evaluate the trend situations.

A

Horizontal Analysis

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47
Q

Illustrates the potential benefits and risks associated with debt.
- Can be used as a measure of a firm’s risk and likelihood of default

A

Debt Management Ratio

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48
Q

PFRS

A

Philippine Financial Reporting Standards

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49
Q

It is used for future planning and deals with procurement ang allocation of financial resources.

A

Financial Management

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50
Q

the accounting objective is neither proper income
determination nor proper valuation of assets but the custody and
administration of funds. This objective directed towards cash flows.

A

Fund Theory

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51
Q

report the change (either an increase or decrease) in a
company’s cash balance over a period of time.

A

Statement of Cash Flows

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52
Q

Important to businesses because they are used to fund the daily
operations and pay short-term obligations.

A

Current Assets

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53
Q

5 Categories of Financial Ratios

A

Liquidity Ratios
Asset Management Ratios
Debt Management Ratios
Profitability Ratios
Market Value Ratios

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54
Q

Probable future sacrifices of economic benefits arising from present obligations of an entity to transfer assets or provide services to other entity in the future as a result of past transactions.

A

Liabilities

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55
Q

Probable future economic benefits obtained or controlled by an entity as a result of past transactions or events. It can be physical/tangible or intangible

A

Assets

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56
Q

3 aspects of communicating

A

recording
classifying
summarizing

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57
Q

EBITDA meaning

A

Earnings Before Interest, Taxes, Depreciation, and Amortization

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58
Q

Measures how well a firm is in generating sales from its inventories
- Expressed as times (X)

A

Inventory turnover ratio

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59
Q

cost of processing and communicating information should not expaceed the benefits to be derived from it.

A

Cost-benefit

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60
Q

Used to find the strengths and weaknesses relative to the industry a firm is belonging to.

A

Cross-sectional analysis

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61
Q

the entity is viewed separately from its owners.

A

Separate Entity

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62
Q

types of profitability ratios

A

operating margin
profit margin
return on total assets (roa)
return on common equity (roe)

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63
Q

Cost of Goods manufactured replaces purchases since
the goods are produced rather than purchased.

A

Manufacturing Firm

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64
Q

The companies used for the comparison are called ______.

A

Benchmark companies

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65
Q

are short-term investments that can be easily converted into cash.

A

Cash Equivalents

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66
Q

this principle recognizes that the nature and amount of information included in the financial statements reflect a
series of judgmental trade-offs.

A

Full disclosure princes;

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67
Q

measures the rate of return on the firm’s assets.

A

return on total assets (roa)

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68
Q

reports a company’s financial
position at a point in time, the company’s resources (assets) namely, what the
company owns and also the sources of asset financing.

A

Statement of Financial Position

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69
Q

________ is physical currency.

A

Cash

70
Q

have higher claim to dividends or asset distribution than common stockholders

A

Preferred Stock

71
Q

Owned by 1 person

A

Sole Proprietorship

72
Q

the value of an asset is determined based on
acquisition cost.

A

Historical Cost Concept

73
Q

2 ways a company can finance its assets:

A

Owner Financing
Non-owner Financing

74
Q

A report that shows all transactions affecting cash flow

A

Statement of Cash Flow

75
Q

Shows how many times the inventory is turned over during the year.

A

Inventory turnover ratio

76
Q

is accumulated in a separate account.

A

Depreciation Expense

77
Q

Amount of taxes owed by the firm to a taxing authority.

A

Taxes Expense

78
Q

measures a firm’s ability to pay its current liabilities using its
cash and equivalents.

A

Cash Ratio

79
Q

2 Types of debt management ratio

A

total debt to total capital
times-interest earned (TIE) ratio

80
Q

Indicates how well or efficient a firm is in using its assets to generate sales.

A

Total assets turnover ratio

81
Q

Measures the rate of return on
common stockholders’ investment

A

return on common equity (roe)

82
Q

Involves comparing the firm’s performance to that of other
firms in the same industry.

A

Financial Analysis

83
Q

Assessing performance of a firm in comparison to the industry averages.

A

Cross-sectional analysis

84
Q

Measure of the firm’s ability to meet its annual interest payments

A

times-interest earned (TIE) ratio

85
Q

A report that shows how items that affect the balance sheet and income statement affect the firm’s cash flows.

A

Statement of Cash Flow

86
Q

it is the process of identifying, measuring, and communicating
economic information to permit informed judgements and decisions by users of
the information.

A

Accounting

87
Q

Indicates how well or efficient a firm is in using fixed assets to generate sales.
- Expressed in times (X)

A

Fixed assets turnover ratio

88
Q

generally relate to long-term liability and stockholders’
equity items.

A

Financing Activities

89
Q

Accounting Equation

A

Assets = Liabilities + Stockholder’s Equity

90
Q

3 Types of noncurrent assets

A

Tangible Assets
Intangible Assets
Depreciation

91
Q

Users of Statement of Cash Flow (3)

A

Management
Investors
Creditors

92
Q

It is not a statutory requirement, and comes after accounting

A

Financial Management

93
Q

are written records that disclose the business activities and the financial performance of a company.

A

Financial Statements

94
Q

These are resources owned by a company

A

Assets

95
Q

Use ratios to analyze, control, and improve the firm’s operations

A

Managers

96
Q

Recognizes depreciation in equal amounts over the estimated life of the asset

A

Straight-Line Method

97
Q

assets, liabilities, equity, income and expenses are stated in terms of a common unit of measure, which Philippine Peso.

A

Monetary Unit Assumption

98
Q

is subtracted from the cost of a plant and equipment.

A

Accumulated Depreciation

99
Q

also called as Net Profit Margin
- Measures net income per amount of sales.

A

profit margin

100
Q

Characterized by their marketability at a readily
determinable market price

A

Marketable Securities

101
Q

Analysis of a firm’s financial ratios over time.

A

Trend Analysis

102
Q

These assets are important to a company because these illiquid investments can help a company to generate profits

A

Non-current assets

103
Q

It help us evaluate financial statements. It helps us compare two or more companies which holds a stronger financial
statement. Usually expressed as a percent or as times per period.

A

Ratio Analysis

104
Q

the accounting objective is geared towards the proper
valuation of assets.

A

Proprietary Theory

105
Q

the financial statements are prepared based on
accounting principles that are applied consistently from one period to the
next.

A

Consistecy Concept

106
Q

recognized as expenses when the related revenue is
recognized.

A

Matching costs

107
Q

3 Forms of Business Organization

A

Sole Proprietorship
Partnership
Corporation

108
Q

General administration of the firm’s operations, includes salaries, insurance, telephone, bad debt expense, and other costs difficult to allocate

A

Administrative

109
Q

3 Types of information provided by accounting

A

Quantitative
Qualitative
Financial information

110
Q

Process of analyzing events and transactions to determine
whether or not they will be recognized.

A

Identifying

111
Q

Measures how much current assets a firm has to pay off its current liabilities.
- Expressed as times (X)

A

Current Ratio

112
Q

Held for business use to generate income and not expected to be converted to cash in a year.

A

Tangible Assets

113
Q

Not expected to be converted into cash in one year and are used to support the firms’ operations.

A

Non-Current Assets
Fixed Assets
Long-term assets

114
Q

The process of comparing a particular firm with a subset of
top competitors in its industry.

A

Benchmarking

115
Q

process of transforming economic data into useful
accounting information, such as financial statements and other
accounting reports, for dissemination to users.

A

Communicating

116
Q

Type of tangible assets (4)

A

Land
Buildings
Machinery and Equipment
Furniture

117
Q

Summarizes revenues and expenses and gains and losses, and ends with the net income for a specific period.

A

Income Statement

118
Q

Financial Statement Analysis that shows each item on a statement as a percentage of a base figure within the statement.

A

Vertical Analysis

119
Q

refers to the principles upon which the process of
accounting is based.

A

Accounting Concepts

120
Q

Owned by two or more

A

Partnership

121
Q

Classifies cash receipts and cash payments into operating, investing, and financing activities.

A

Statement of Cash Flow

122
Q

It is a form of business organization that is easy to form and has more capital than sole proprietorship

A

Partnership

123
Q

Provide a basis to examine how a firm is doing, its current resources, and its financial policies

A

Financial Statements

124
Q

Types of Current Assets (5)

A

Cash and Cash Equivalents
Marketable Securities
Accounts Receivable
Inventories
Prepaids

125
Q

Companies retain net income after distributing dividends to shareholders.

A

Retained Earnings

126
Q

2 Types of operating expenses

A

Selling
Administrative

127
Q

3 Important activities in accounting

A

Identifying
Measuring
Communicating

128
Q

EBIT meaning

A

Earnings Before Interest, and Taxes

129
Q

It is valuated by fact or opinion.
By fact: measured by cash
By opinion: estimation

A

Measuring

130
Q

is the use of caution when making estimates under conditions of uncertainty, such that assets or income are not overstated, and
liabilities or expenses are not understated.

A

Conservatism

131
Q

Difference between the value of all assets and all liabilities.

A

Stockholders’ Equity

132
Q

Something a person or company owes, usually a sum of money.

A

Liabilities

133
Q

Average number of days that receivables remain outstanding before they are collected.

A

Days Sales Outstanding (DSO)

134
Q

Measure how effectively the firm is in managing its assets.

A

Asset Management Ratios

135
Q

Who are interested in a company’s efficiency, risk, and growth
prospects.

A

Stock Analysts

136
Q

the effects of transactions and other events are recognized when they occur and not as cash is received or paid.

A

Accrual Basis of Accounting

137
Q

shares in all stockholders’ rights and represents ownership that has voting and liquidation rights.

A

Common Stock

138
Q

the accounting objective is geared towards proper income
determination.

A

Entity theory

139
Q

Show the combined effects of liquidity, asset management, and debt on operating results.

A

Profitability ratios

140
Q

reports on changes in key types of equity over a period of time.

A

Statement of Stockholders’ Equity

141
Q

It is a statutory requirement.

A

Accounting

142
Q

Do not have cost of goods sold but often have cost of services.

A

Service Firm

143
Q

Involves evaluation of trends in the firm’s financial position over time.

A

Financial Analysis

144
Q

the life of entity is divided into series of reporting periods - Calendar year or fiscal year

A

Time Period

145
Q

expenses incur during operations.

A

Operating Expenses

146
Q

generally result from changes in long term asset items

A

Investing Activities

147
Q

Includes bank loan officers and bond rating analysts, who
analyze ratios to help judge a firm’s ability to repay its debts.

A

Credit Analysts

148
Q

It is a record of the historical transactions and it record transactions in a systematic manner for a particular period..

A

Accounting

149
Q

Types of noncurrent liabilities

A

Long-term debts
Long-term accrued liabilities

150
Q

It is a form of business organization that has a limited capital

A

Sole Proprietorship

151
Q

Types Asset Management Ratio (4)

A

inverntory turnover ratio
days sales outstanding (dso)
fixed assets turnover ratio
total assets turnover ratio

152
Q

the entity is assumed to carry on its operations for an indefinite period of time.

A

Going concern assumption

153
Q

It should help answer the question: Will the firm be able to pay off its debts as they come due and thus remain a viable organization?

A

Liquidity Ratios

154
Q

represent revenue from goods or services sold to customers. The
firm earns revenue from the sale of its principal products.

A

Sales (revenue)

155
Q

Reflect the net result of all of the firm’ financing policies and operating decisions.

A

Profitability ratios

156
Q

Balance of goods on hand. Includes raw materials, work in
process, finished goods available for sale, and supplies.

A

Inventories

157
Q

Determine the effectiveness of a firm’s credit and collection efforts in allowing credit to customers, as well as its ability to collect from them.
- Expressed as day

A

Days Sales Outstanding (DSO)

158
Q

the process of converting non-cash assets into cash or claims for
cash.

A

realization

159
Q

received from shareholders for stock.

A

Contributed Capital

160
Q

Liabilities that must be repaid in one year.

A

Current Liabilities

161
Q

Obligations due more than one year into the future.

A

Non-Current Liabilities

162
Q

involves assigning numbers, normally in monetary terms, to
the economic transactions and events.

A

Measuring

163
Q

this theory is applicable when there are two classes
of shares issued, i.e., ordinary and preferred

A

Residual equity theory

164
Q

4 Types of Financial Statements

A

Statement of Financial Position (Balance Sheet)

Income Statement

Statements of Cash Flow

Statements of Stockholders’ Equity

165
Q

used to estimate the likelihood of improvement or deterioration in its financial condition.

A

trend analysis

166
Q

fundamental concepts or principles and basic
notions that provide the foundation of the accounting process.

A

Accounting Assumptions

167
Q

This financial statement consists of: (3)

A

Assets
Liabilities
Stockholders’ Equity

168
Q

Measure how effectively a firm manages its debt

A

Debt Management Ratios

169
Q

Expenditure made in advance of the use of the service or goods.

A

Prepaids

170
Q

Users of Financial ratios (3)

A

Managers
Credit Analysts
Stock Analysts

171
Q

Measures the percentage of the firm’s capital provided by the creditors.
- Company’s debt ratio

A

total debt to total capital

172
Q

It is a form of business organization that is time consuming

A

Corporation

Quiz (6 decks)

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