information for decision making and accounting

Question 1

language of business

Answer 1

accounting

Question 2

accounting is information system that _______, ________, and ______ financial information about an entity (a business) to decision makers

Answer 2

measures
records
communicates

Question 3

name the three types of users of financial information

Answer 3

internal
external
government

Question 4

for each toe of user of financial information the type of accounting done and the accounting rules followed (language) to provide that user with information

Answer 4

internal: managerial accounting
external: financial accounting
government: tax accounting

Question 5

state the basic accounting equation

Answer 5

assets = liabilities + equity

Question 6

_____ are the resources a business owns or controls, the things of value the business owns or controls

Answer 6

assets

Question 7

_____ are the debts the business owes

Answer 7

liabilities

Question 8

_____ are the resources that belong to the owners, what resources are left after paying off all liabilities

Answer 8

equity

Question 9

define revenue

Answer 9

the amount of money received from goods or services or other business activity

Question 10

define expenses

Answer 10

the cost incurred to do business

Question 11

define net income

Answer 11

revenue - expense = net income

Question 12

define earnings per share

Answer 12

how much income or profit did one stock make

net income / number of shares of stock outstanding

Question 13

______ is the produce to do accounting

Answer 13

account cycle

Question 14

accounting is information system that ____, _____, and ______, financial information about an entity to decision makers

Answer 14

measures
records
communicates

Question 15

what vehicle do companies use to communicate financial information to its external users?

Answer 15

financial statements

Question 16

name three primary financial statements

Answer 16

balance sheet
income statement
statement of cash flows

Question 17

______ is the financial statement that:
• describes the companies operating performance
• contains the amounts of company revenues and expenses
• computes company’s net income or loss
• reports the company’s earnings per share

Answer 17

income statement

Question 18

_____ is the financial statement that:
• describes financial position of a company
• gives a picture of company’s financial position at a moment in time
• describes resources a company owns or controls and the parties that have claim to those resources

Answer 18

balance sheet

Question 19

______ is the financial statement that:
• describes cash coming into the business and cash leaving the business
• details the reasons cash changed over the accounting period

Answer 19

statement of cash flow

Question 20

in the US, ______ are the rules used to prepare financial statements

Answer 20

GAAP

Question 21

outside of the US, many countries require______ as rules and used to prepare financial statements

Answer 21

IFRS

international financial reporting standards

Question 22

______ _____ is the market value of a company’s outstanding share of common stock

Answer 22

market capitalization

Question 23

_________ typically have market capitalization of $10 billion or more

Answer 23

large cap firms

Question 24

______ typically have market capitalization of $2 to $10 billion

Answer 24

mid cap firms

Question 25

______ typically have market cap of $300 million to $2 billion

Answer 25

small cap firms

Question 26

______ expresses the mathematical relationship between two numbers

Answer 26

ratios

Question 27

________ __________ is a way to use financial statement contents to make judgements about a company’s past financial performance or current financial position

Answer 27

ratio analysis

Question 28

______ _____ ratio measures the pete engage of each dollar of sales (revenue) that results in net income (profit)
• the higher the % the better
•net income / sales
• comes from data found on the income statement
• measures profitability

Answer 28

profit margin

Question 29

________ ___ ________ ratio measures how effectively the company is using their assets (resource) to produce net income (profit)
• the higher the % the better
• net income / total assets
• comes from data found on the income statement and data found on balance sheets
• measures profitability

Answer 29

return on assets

Question 30

_______ _______ ratio measures how many times per fiscal year a company collects it receivables
• the higher the ratio the better
• sales / receivables

Answer 30

receivables turnover

Question 31

_______ _____ ratio measures how many times per fiscal year a company sells and replaces its inventory
• sales / inventory

Answer 31

inventory turnover

Question 32

_____ ratio measures the company’s ability to pay its debts imgur next 12 months
• current assets / current liabilities

Answer 32

current

Question 33

______ ___ _______ _______ ratio measures the lerecentage of the company’s finances by debt
• total liabilities / total assets

Answer 33

debt to assets ratio