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Finance > Financial Statements > Flashcards

Financial Statements Flashcards

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1
Q

3 types of companies

A
  1. Service Companies
  2. Merchandizing Companies
  3. Manufacturing Companies
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2
Q

Service Company: examples and money earned is called…

A
  • airlines, consultants, lawyers, banks, universities…
  • customer purchases something intangible
  • they earn REVENUE
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3
Q

Money earned by merchandizing and Manufacturing companies is called…

A

Sales

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4
Q

Synonyms for REVENUE depending on type of agency:

A
  • tuition
  • admission
  • consulting fees
  • service revenue
  • fees earned
  • commission
  • concessions revenue
  • subscription revenue
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5
Q

Supplies ASSET turns into Supplies EXPENSE when

A

the minute it starts to be consumed

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6
Q

Examples of EXPENSES (income statment)

A
  • salary expense
  • advertising expense
  • supplies expense
  • rent expense
  • depreciation expense
  • interest expense
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7
Q

Functions of Financial Accounting (in order)

A
  1. Recording of daily business transactions in different journals
  2. Qualifying/Classing said transactions
  3. Summarizing said transactions
  4. Analyzing and preparing financial statements
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8
Q

Breakdown of STOCKHOLDER’S EQUITY

A
  1. Preferred Stock
  2. Paid in Capital from Preferred Stock
  3. Common Stock
  4. Paid in Capital from Common Stock
  5. Retained Earnings (R/E)
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9
Q

4 Types of Assets

A
  • Current Assets
  • Fixed Assets
  • Investments
  • Other Assets
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10
Q

Examples of an “Other Assets”

A
  • copyrights
  • patents
  • brand name
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11
Q

Examples of Current Assets

A
  • Cash
  • A/R
  • Notes Receivable
  • prepaid expenses
  • inventories
  • marketable securities
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12
Q

Examples Fixed Assets

A
  • Office Equipment
  • Vehicles
  • Buildings that are OWNED
  • Heavy Equipment
  • Land
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13
Q

Which fixed asset doesn’t depreciate

A

Land

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14
Q

Types of Liabilities

A
  • Short term

- Long term

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15
Q

Definition: Current Liabilities

A

Must be paid out within 1 year

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16
Q

Examples: Current Liabilities

A
  • Accounts Payable
  • Notes Payable (maturity < 1 year)
  • Interest Payable
  • Salaries Payable
  • Taxes payable (ex. sales tax)
  • unearned fees
  • dividends in arrears
  • accrued taxes
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17
Q

Definition Unearned Fee

A

Money that you received but you haven’t provided the service yet

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18
Q

Examples: Long-term Liabilities

A
  • Notes Payable (maturity > 1 year)
  • Mortgage Payable
  • Bonds Payable
  • Term Loans
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19
Q

Book Value of Fixed Asset =

A

= Value of Asset - Accumulated Depreciation

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20
Q

Allowance for Doubtful Account is an ___ in a balance sheet and is subtracted from ___

A

Current Asset; Accounts Receivable

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21
Q

Allowance for Doubtful account is also referred to as _____ by banks

A

Loan Loss Reserve

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22
Q

Net working Capital =

A

= Current Assets - Current Liabilities

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23
Q

Retained Earnings are…

A

Earnings of the company which are reinvested in the core business

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24
Q

Net Income =

A

= Revenues - Expenses = Net Profit

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25
Q

Cash Flow is…

A

Increase or decrease in cash over a period. Different than net income

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26
Q

the INCOME STATEMENT…

A

Measures a company’s performance over a specific PERIOD of time, and reports profits and net income based on revenues and expenses

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27
Q

EPS =

A

= (Net Income after Taxes - Preferred Dividends) / Total # of Outstanding shares of COMMON stock

28
Q

How long after the end of their fiscal year to corporations have to file taxes?

A

2.5 months

29
Q

What is the FY of the US Government

A

Oct 1st to Sept 30

30
Q

Profit Margin =

A

= (Net Income)/Total Revenue * 100%

31
Q

Dividend Payout Ratio =

A

= (Dividends/Net Income) * 100%

32
Q

Operating Cash Flow =

A

= EBIT + depreciation - taxes

represents the funds a company generates from normal business operations

33
Q

Accrual Based Accounting

A

company recognizes and records revenue at time of sale, whether or not it has received the revenue in cash

34
Q

Statement of Retained Earnings shows…

A
  • what did the company do with the net income
  • how much was paid out in dividends
  • how much was retained and used internally (R/E)
    ….over a period of time..
35
Q

Statement of Cash Flow divides into the categories of cash from…

A
  • Operating Activities
  • Financing Activities
  • Investing Activities
36
Q

Cash from Operating Activities focuses on…

A
  • Current Assets and Current Liabilities
37
Q

Cash from Investing focuses on…

A

Fixed Assets, buying and selling thereof

38
Q

Cash from Financing

A
  • IPO
  • buying back your own shares
  • long term borrowing
  • retiring long term debt
  • paying cash dividends
  • short term borrowing from bank
39
Q

Free Cash Flow generally refers to cash flow from…

A

assets

cash available to pay back owners/creditors once the company has made investments in working capital and capital assets necessary for growing and operating

40
Q

When do companies need to send annual financial statements to the SEC

A

60 days after the end of their FY

41
Q

10-Q reports must be filed…

A

quarterly with the SEC

42
Q

Lessons from 1929 Crash

A
  • establishment of the Securities and Exchange Commission

- Glass-Steagall Act 1934: separation of investment banks and commercial banks

43
Q

Working capital should be ___ for a healthy company

A

Positive

44
Q

Current Ratio =

A

= Current Assets / Current Liabilities

  • unit is TIMES
45
Q

Current Ratio should be ___ for a healthy company

A

> 1 (amount depends on industry average)

46
Q

Accounts Receivable Turnover =

A

Sales / AR = Credit Sales / 360 days * Average Collection Period

47
Q

Assets Turnover =

A

= Sales / [total] Assets

AKA Sales to Assets

48
Q

Fixed Assets Turnover =

A

= Sales / Fixed Assets

49
Q

Inventory Turnover =

And will be value of ___ for a service company

A

= Sales/Inventory

ZERO for service company

50
Q

If AR Turnover = 12 times, what is the average collection period

A

Average Collection Period = 360/12 = 30 days

51
Q

If AR Turnover = 6, what is the average collection period?

A

= 360 days / 6 = 60 days

52
Q

DSO means ___ and is AKA…

A

Days Sales Outstanding

Average Collection Period

53
Q

Debt Ratio =

A

= Total Liabilities / total Assets * 100%

54
Q

It is a better sign when the Debt Ratio is….

A

Lower

55
Q

Dupont Identity breaksdown ROE into 3 components…

A

ROE = Profit Margin * Assets turnover * Financial Leverage(Total Assets/ Total Equity)

56
Q

ROE =

A

= Net Income / Total Equity

57
Q

Equity is …

A

What the owner(s) receive after a company has satisfied all it’s liabilities

58
Q

A marketable security is sold below cost, this affects

A

Cash flow from operations

59
Q

A marketable security is a

A

current asset

60
Q

10 year notes are issued to pay off AP, this affects

A

Cash flow from Financing

61
Q

A fully depreciated asset is retired, this affects cash flow from

A

Investing

62
Q

Short term notes receivable are sold at a discount, this means your Current Assets will ___, your Current Ratio will ___ and your net income will ___. It affects your cash flow from ___

A

Decrease (all 3) ; Operations

63
Q

Short term notes are issued to trade off past due accounts payable, this will have the following effect on current assets and current ratio

A

no effect, change is 0, apples for apples

64
Q

A marketable security is sold below cost, this will have the following effect on total current assets and current ratio

A

decrease

65
Q

Equipment is purchased with short term notes, this will ___ total current assets, ____ current ratio, and ____ net income. If affects cash flow from ____

A

TCA no change
CR decreases
net income no change
Investing

Finance (9 decks)

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