Quiz 4 Flashcards
1
Q
balance sheet (financial condition)
A
reports the company’s assets, liabilities and owners’ equity as of a specified date
2
Q
balance sheet date
A
the specified date of the balance sheet reporting assets and liabilities
3
Q
asset
A
anything owned by the company
4
Q
accounts receivable
A
amounts due from customers for goods and services the co. has already provided
5
Q
inventory
A
merchandise normally available for sale to customers
6
Q
current asset
A
an asset expected to be converted to cash within one year
7
Q
non current asset
A
an asset expected to be converted to cash in greater than one year - has 2 sub categories
8
Q
categories of non current assets
A
fixed and intangible
9
Q
fixed asset
A
land, buildings, equipment and other long-term (more than 1 year) assets, are also known as plant assets
10
Q
intangible asset
A
sub category of long term assets - include patents, trademarks, copyrights and goodwill
11
Q
alternate names for fixed assets
A
PP&E property plant and equipment
12
Q
accounts payable
A
amount due to suppliers/distributor for goods and service co has already received
13
Q
long term liability
A
a liability expected to be paid in greater than one year
14
Q
current liability
A
a liability expected to be paid within one year
15
Q
OE
A
indicates the owners’ investment in the business
16
Q
B2B
A
Business-to-business is a situation where one business makes a commercial transaction with another.
17
Q
current + non current assets equal
A
total assets
18
Q
current liabilities + long-term debt equals
A
total liabilities
19
Q
alt names for balance sheet
A
statement of financial condition/position
20
Q
3 examples of intellectual property
A
patent, copyright, trademark
21
Q
2 names for reinvested profits
A
owners equity and retained earnings
accumulated earnings and reinvested profits
22
Q
who do the profits of the business belong to
A
the owners
23
Q
another term for profit
A
earnings/income
total after expenses
24
Q
corporations name for owners equity
A
stockholder/shareholder equity
25
is preferred stock listed before or after common on the balance sheet
before
26
income statement
reports the business’s revenues, expenses, and net income for a specified period of time
27
revenues / top line
total sales
28
expenses
the cost of operations incurred to generate revenue
29
bottom line
the net income of a company for a certain period
30
2 alternate names for income statement
P&L/statement of operations
31
alternate terms for income
profit, earnings
32
dividend
a distribution (payment) of a corporation's net income to its shareholders
33
what happens to profits not paid as dividends
reinvested and show up as retained earnings on the balance sheet
34
term for reinvested profits on the balance sheet
retained earnings
35
capital structure of a business
the % of debt and equity financing used to pay for the businesses assets
36
debt financing + equity financing =
capital structure
37
how to calculate capital structure
debt financing + equity financing
38
debt-to-total assets ratio formula
total liabilities / total assets
39
alt name for debt-to-total assets ratio
debt ratio
40
debt-equity ratio formula
total liabilities / total equity
41
alt name for debt-equity ratio
debt to equity ratio
42
debt-to-total assets ratio (2 interpretations)
indicates % of assets financed by debt
indicates % of assets financed by equity
% above 50 means more debt than equity
43
interpretation of debt-equity ratio
indicates debt capital as a multiple of equity capital
| greater than 1 means more debt
44
with debt to total asset how to calc if it is using more debt than equity
divide liabilities by total assets = (L+OE), if percentage is more than 50, using more debt
45
with debt to equity how to calc if it is using more debt than equity or equal amounts
divide debt by equity, comes out as a decimal, that is the multiple of debt - greater than 1 means more debt
46
whether a higher debt-to-total assets ratio indicates a greater risk of default, or a smaller risk of default, than a lower debt-to-total assets ratio
greater risk of default
47
whether a higher debt-equity ratio indicates a greater risk of default, or a smaller risk of default, than a lower debt-equity ratio
greater risk of default
48
basic accounting equation
A=L+OE
49
consolidated financial statement
financial statements of a parent company and its subsidiaries
50
parent company
a company that owns another
51
subsidiary
a company owned by another company
52
sister companies
companies that share a parent company
53
allowance of doubtful account
estimates the percentage of accounts receivable that are expected to be uncollectible
54
alt names for allowance of doubtful account
estimated uncollectibles
55
A/R net Formula
gross A/R - estimate of uncollectibles
56
which is the total amount owed by customers to the company, gross A/R or A/R net
Gross A/R
57
which is the amount the company actually expects to collect, gross A/R or A/R net
A/R net
58
which is included in the company's total assets, gross A/R or A/R net
A/R net
59
which fixed asset is listed first
Land
60
which fixed asset does not depreciate
land
61
which indicates the total cost of the venture's fixed assets, gross fixed assets or net fixed assets
historical cost/gross
62
which is included in the venture's total assets, gross fixed assets or net fixed assets
net fixed assets
63
whether a fixed asset's accumulated depreciation increases over time, or decreases
increases
64
whether a fixed asset's net book value increases over time, or decreases
decreases
65
depreciation
spreading historical cost of a fixed asset over the assets estimated useful life
66
accumulated depreciation
a fixed assets total depreciation from acquisition to the balance sheet date
67
market value
price a buyer would pay to an unrelated seller
68
[liabilities]
debt capital
69
accrued payables
expenses that have been incurred but not yet paid
70
3 examples of accrued payables
accrued wages/salaries
accrued interest
taxes payable
71
2 other terms for contributed capital
invested capital
| paid-in capital
72
retained earnings
reinvested profits
73
another term for retained earnings
owners equity and retained earnings
| accumulated earnings and reinvested profits
74
dividend
a distribution of profits to the owners
75
whether the book value of a fixed asset is the same as its market value
it is not the same
76
what goodwill on the balance sheet indicates
indicates the co has acquired other companies
77
the type of asset that goodwill is
noncurrent - intangible
78
whether the par value of stock is the same as its market value
no
79
who determines if corp will pay dividend
board of directors
80
role of board of directors
deciding to pay dividends/to protect the interests of the shareholders
81
formula for ending gross fixed assets
beg gross fixed + historical cost of fixed assets purchased - historical cost of assets sold in period
82
net book value of a fixed asset
historical cost - accumulated depreciation
83
amt reported on balance sheet for preferred stock
number of pref shares issued x par value per pref share
84
amt reported on balance sheet for additional paid in capital preferred
anything contributed above preferred stock par value
85
amt reported on balance sheet for common stock
number of common shares issued x par value per common share
86
amt reported on balance sheet for additional paid in capital common
anything contributed above common stock par value
87
ending retained earnings formula
beg retained earning + net income - dividends
88
net working capital in dollars
current assets - current liabilities
89
current ratio formula
current assets/current liabilities
90
quick ratio formula
(current assets - inventory) / current liabilities
91
what does net working capital mean
amount of cash that can safely be spent
92
what does current ratio mean
measures if the firm has the resources to pay debt with cash and assets
93
what does quick ratio mean
how easily could you pay off liabilities in a very short amount of time (smaller than current ratio)
94
3 ways to analyze a ventures ratios
compare to competitors
compare to companies in the same stage of life cycle
analyze trends for the company over time (up/down)
95
3 limitations of financial statements
based on historical actual transactions and do not indicate future prospects
many valuable intangibles can not be recorded as assets on the balance sheet
net book value may be very different than their market value
96
3 intangibles useful to a venture but cant be on balance sheet
experienced personnel
efficiencies (established procedures)
customer loyalty/reputation (goodwill from owned co.)
97
2 examples of assets recorded on the balance sheet at lower than market value (undervalued)
land
| buildings
98
cash basis accounting
revenue is recorded when cash is received
| expenses are recorded when cash is paid
99
accrual basis accounting
revenues are recorded when earned or when services are performed REGARDLESS of when cash received
expenses are recorded when incurred or become liable for them REGARDLESS when cash paid
100
capitalizing
recording purchases as assets and not as expenses in the current period
101
expensing
recording purchases as expenses
102
revenue recognition
recording revenues in the accounting system
103
sales discounts
discounts given to A/R customers for paying early
104
whether capitalizing has an immediate impact on the income statement (and therefore net income), or a delayed impact
delayed
105
whether expensing has an immediate impact on the income statement (and therefore net income), or a delayed impact
immediate
106
examples of operating expense
utilities/salaries/depreciation
107
2 alt names for EBIT
operating income / operating profit
108
multistep income statement
```
revenues
(returns, discounts)
---
net sales
(COGS)
---
Gross profits
(ops expense)
---
EBIT (aka operating income)
(interest expense)
---
EBT
(taxes)
---
net income
```
109
matching principle
expenses are recorded in the same accounting period as the revenues they helped generate
