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Financial Statements > Midterm > Flashcards

Midterm Flashcards

1
Q

If Sources of Cash > Uses of Cash, que pasa?

A

$ added to Checking Account

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2
Q

List some Assets (5)

A

Accounts Receivable, Cash, Inventory, Prepaid rent, PPE, Goodwill

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3
Q

List some Liabilities (4)

A

Accounts Payable, Accrued Salaries, Accrued Interest, Utilities Payable

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4
Q

Cash Inflow examples (4)

aka How you might finance stuff

A

Sales $$, taking out loans, issuing stock, selling used/old PPE

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5
Q

Cash Outflow examples (10)

A

Producing inventory, paying salaries, rent, paying off loans (/interest), taxes, buying PPE, acquiring companies, buying intangible assets, buying back stock, paying dividends

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6
Q

THE INCOME STATEMENT!

A
  • earnings statement*
  • sum total revenues for year (or accounting period)
  • prepared using Accrual Accounting
  • bottom line is Net Income
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7
Q

THE BALANCE SHEET

A
  • statement of financial position
  • shows ending balances of that year
  • point in time!
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8
Q

Accrual Basis Accounting

A

recognizes receivables from making sales on credit &; liabilities for unpaid expenses (?)

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9
Q

Financial condition

A

assets vs. liabilities at end of period (measure this quickly by amt in checkbook at end of year)

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10
Q

Is COGS an expense?

A

Yes

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11
Q

Leasehold Improvements

A

improvements made to make space better for lessees (check this)

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12
Q

Salvage value and depreciation value…

A

If there’s a salvage value to be had from selling old PPE, we take that off before we calculate the depreciation value

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13
Q

Example of Impairment of Assets?

A

Blockbuster’s VHS tapes!

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14
Q

def: Intangible Asset

A

Provide economic value to the company for > 1 year, like a patent (that was purchsed)

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15
Q

def: Capital Stock (Common Stock)

A

$ investors paid to invest in the company. Like the original price of stock shares

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16
Q

Three sources of financing

A
  1. Borrowing / 2. Issuing shares of stock / 3. Reinvesting profits
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17
Q

Treasury Stock

A

when a company buys back its own stock

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18
Q

Advantages of Sole Proprietorships (3)

Disadvantages (2)

A
  • easy to start up
  • no incorporation fees to pay
  • owner receives all profits
  • hard to raise capital (can’t issue stocks/bonds)
  • riskier - it’s all on the owner. in bankruptcy, creditors can take the personal assets of the owner
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19
Q

Advantages of Partnerships

Disadvantages

A
  • relatively easy and inexpensive to form
  • wider pool of knowledge, skills, contacts so better mgmt
  • each partner is personally liable for all debts
  • in bankruptcy, creditors can take the personal assets of the owner
  • less stability - a partner cannot transfer interest in the business w/o unanimous consent of partners
20
Q

Stuff about corporations

A
  • ownership divided into shares of stock.
  • in founding charter, authorized to issue a maximum number of shares of stock
  • in bankruptcy, the most they will lose is the amt they paid for their shares
  • obvi, easy to raise capital by selling shares of stock
21
Q

Diff between investors and creditors

A

investors: don’t get paid back but share in the profits of the company (dividends)
creditors: will get paid back in full (+ interest)

22
Q

External parties

Internal parties

A

E: creditors, investors

I: owners, employees

23
Q

GAAP Four Assumptions

A
  1. Separate Entity
  2. Going Concern
  3. Measurement and Units of Measure
  4. Periodicity
24
Q

GAAP Four Basic Accounting Principles

A
  1. Historical Cost
  2. Revenue Recognition
  3. Matching
  4. Full Disclosure
25
Q

GAAP Four Constraints

A
  1. Objectivity/Estimates and Judgements
  2. Materiality
  3. Consistency
  4. Conservatism
26
Q

Periodicity

A

Organization’s life is divided into cycles, financial statements for each period

27
Q

T/F Financial statements include internally developed patents/trademarks (where the value cannot be measured)

A

False

28
Q

Going concern

A

Company expects to operate indefinitely

29
Q

Historical cost (principle)

A

Assets are reported at their initial historical cost (not current market value!)

30
Q

Revenue Recognition (principle)

A
  • revenue must be recorded when it is earned and measurable

- revenue is recognized when earned, even if the cash will not be received for a long time

31
Q

Matching (principle)

A

-costs associated with producing a product must be recorded (matched to) the revenue generated from the sale of that product during the same period

32
Q

Full disclosure (principle)

A

-companies must disclose all relevant economic information that will make a diff to their users to make an informed, rational decision aw

33
Q

Materiality (constraint)

A

-only significant items need to be reported

34
Q

Consistency (constraint)

A

-gotta use the same accounting principles over time so yoy comparisons are possible

35
Q

Conservatism

A

ya know, don’t overstate assets/revenues; don’t understate liabilities/expenses

36
Q

Interpret GM% of 35%

A

65c of every dollar made went into producing the product; 35c is left to cover other expenses like interest, etc.,

37
Q

T/F The longer a company can stretch out the payable period, the better

A

True

38
Q

T/F The longer the cash conversion cycle, the better

A

False. You want to be paid back for money lent out asap.

39
Q

Amortization

A

Accumulated depreciation, for intangible assets

40
Q

Goodwill
+
how does it get evaluated

A

An intangible asset that results when a company purchases another company for more than the book value.

It gets evaluated every year. So it can get written down.

41
Q

Formula for book value

A

TA - TL

42
Q

Period expenses

A

Not associated with a single product; listed as an expense in the period they occurred. Like salary, overhead.

43
Q

Double entry accounting

A

xx

44
Q

T/F

Expenses are matched to revenue when feasible

A

True

45
Q

Is Inventory account based on the cost of the inventory or what was paid for the goods?

A

Original cost of the inventory

46
Q

What does OE stand for

A

Owners Equity

Financial Statements (1 decks)

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