Financial Management Flashcards
For general purposes, how long should business records be kept for?
Records should be kept for up to seven years. Records on assets like vehicles, equipment, buildings or land need to be kept as long as the asset is owned. For employees records held for at least four years after the date the tax is due.
What are the three basic types of financial statements?
- Balance Sheet
- Income Statement
- Cash Flow Statement
What is a profit and loss statement?
Also called Income Statement, a company’s financial report that indicates how the revenue is transformed into net income (profit).
Cash Flow Statement
Provides information about cash receipts and payments during any given period. It shows receipts, payments and net change.
Liquidity Ratio
Current assets ÷ Current liabilities = Liquidity Ratio
Quick Ratio or “Acid Test”
(Cash + Accounts Receivable) ÷ Current liabilities = Quick Ratio
Current Ratio
Total Current Assets ÷ Total Current Liabilities
Debt-to-Equity
Total Liabilities (or Debt) ÷ Total Owners’ Equity
Prompt Payment Act
Prime contractors must be paid within 14 days after submitting a progress payment. They are then required to pay subcontractors within 7 days of receipt of that money. Not doing so demonstrates an intent to defraud.
___________________ is crucial in maintaining a successful business.
Organization
A system of recording and summarizing business and financial transactions is called _______________.
accounting
A company’s cash, accounts receivable, inventory, notes receivable and prepaid expenses are examples of ______________________.
current assets
Notes payable, accounts payable, unpaid wages and taxes due are all examples of ___________________________.
Current Liabilities
If a business has Current Assets of $500,000 and Current Liabilities of $250,000, what is the Net Working Capital of the business?
$250,000
The financial statement that shows the financial status of a company at a specific date is called the __________________.
Balance Sheet
Current Liabilities are debts that must be paid within _______________.
One year
For general purposes, finanacial records should be kept for up to ________ years.
seven (7)
Accounting is based on five basic account types:
Assets, Liabilities, Equity, Income and Expenses
There are three basic types of financial statements. They are:
Balance Sheet, Income Statement and Cash Flow Statement
Many times a contract cannot be completed in one taxable year. The Tax Reform Act or 1986 allows you to use a different accounting method in order to estimate income. Which of the following are acceptable?
Completed Contract Method
Percentage of Completion Method
Cost Comparison Method
The Prompt Payment Act requires that prime contractors must be paid within _______ after submitting a progress payment. They must then pay their subcontractors within _____ of that money.
14 days/7 days
2/10 prox net 30 means:
2% discount if paid by the 10th day of the month following purchase; otherwise the entire amount is due within 30 days
A ________ form is completed by the employee. It allows the employer to calculate the correct federal withholding based on an individual’s filing status, withholding allowances and exemptions.
W-4
The general calculation to determine net pay is : Gross Pay - taxes withheld - deductions withheld = Net Pay
True
