New Chapter 2 Flashcards
Describe the order of the classified balance sheet?
- ) Current Assets: (descending in liquidity)
- ) Long term Assets
- ) PP & E
- ) Intangible Assets
- —————————— - ) current liabilities
- ) long term liabilities.
- ——————————
What do profitability ratios measure?
They measure the income or operating success of a company for a given period.
What do liquidity ratios measure?
They measure the companies short term ability to meet and pay back its maturing obligations.
What do solvency ratios measure?
They measure the ability of a company to survive over a long period of time.
Comparability?
Ability to easily evaluate one company’s results relative to anthers.
Going concern asssumption?
belief that a company will continue to operate for the foreseeable future.
Materiality?
The judgement concerning whether an item is large enough to matter to decision makers
Full discloser principle?
The reporting of all information that would make a difference to financial statement users.
Periodicity assumption?
Thee practice of preparing financial statements at regular intervals.
Relevance?
The quality of information that indicates the information makes a difference.
Historical cost principle?
Belief that items should be reported on the balance sheet at the price that was paid to acquire them
Consistency?
A company’s use of the same accounting principles and methods from year to year.
Economic entity assumption?
Tracing accounting events to particular companies.
Faithful representation?
The desire to minimize errors and bias in financial statements.
Monetary unit assumption?
Reporting only those things that can be measured in dollars.
Who is the primary accounting standard setting body?
FASB financial accounting standard body
What corporations make up the accounting standard bodies?
Sec, Fasb, Iasb, PCAOB
Who oversees the accounting standard bodies?
The SEC
What is free cash flow and what is its purpose?
- ) The net cash provided by operating activities after adjusting for any capital expenditures and dividends paid.
- This ultimately determines the amount of money a company can reinvest.
What is the term for when the independent outside auditor agrees with the annual report?
Verifiable.
