Unit 1: Ethics Flashcards
Under the Direct Method,
What categories determine net cash inflows:
What categories determine net cash outflows:
Cash receipts from (net cash inflows):
Customers, Sale of trading securities, Interest earned, Dividends on equity investments, Other operating cash receipts
Cash disbursements for (net cash outflows):
Inventory, Purchase of trading security, Salaries & wages, Interest expense, Taxes, Other operating cash payments
The net of these represents the ‘net cash provided by oeprating activities’
Beginning with Accrual Basis Net Income, list the additions to arrive at the ‘net cash provided by operating activities’:
Additions:
__________ in Accounts Receivables
__________ in Inventory
__________ in Accounts Payable
__________ Expense
Amortization of bond __________
__________ on sale of plant assets
__________ on investment in equity method investees
Additions:
Decrease in Accounts Receivables
Decrease in Inventory
Increase in Accounts Payable
Depreciation Expense
Amortization of bond discount
Loss on sale of plant assets
Loss on investment in equity method investees
Beginning with Accrual Basis Net Income, list the subtractions to arrive at the ‘net cash provided by operating activities’:
Subtractions:
__________ in Accounts Receivable
__________ in Inventory
__________ in Accounts Payable
Amortization of bond __________
__________ on sale of plant assets
__________ on investment in equity method investees
Subtractions:
Increase in Accounts Receivable
Increase in Inventory
Decrease in Accounts Payable
Amortization of bond premium
Gain on sale of plant assets
Income on investment in equity method investees
What is the most significant provision of SOX?
…Adoption of a code of ethics for senior financial officers
List users with direct interests?
- Investors or potential investors
- Suppliers and creditors
- Employees
- Management
List users with indirect interests?
- Financial advisors and analysts
- Stock markets or exchanges
- Regulatory authorities
Calculate COGS vs COG Manufactured
COGS:
Beg Inv.
+ Net Purchases
= Good Available for Sale
- Ending Inv.
= COGS
COG Manufactured:
All Manufacturing Costs during period
+ Beg Work-in-Progress
- End Work-in-Progress
What are the two reporting components of Discontinued Operations?
- Income or loss from operations of the division from the first day of the reporting period until the date of disposal
- Gain or loss on the disposal of the divisions
What are extraordinary items?
How must they be shown?
Extraordinary items are both unusual in nature and infrequent in occurrence.
They must be shown net of tax
What do Operating Activities include?
The effects of transactions involved in the determination of net income.
- Cash receipts from delivery of goods or the performance of services
- Cash payments to suppliers for inventory
- Cash receipts from interest and dividends on investments
- Cash receipts from interest on loans
What are Investing Activities?
- The purchase and sale of securities of other entities
- The purchase and sale of PPE
- The granting and repayment of principal on loans made to other entities
What do Financing Activities include?
The effects of transactions involving liabilities and owners’ equity.
- Issuance of equity securities
- Retirement of bonds payable
- Payment of dividends
What are common-size financial statements?
They restate financial statement line items in terms of a $age of a given amount.
- Net sales for income statement
- Total assets for balance sheet
Describe Vertical and Horizontal Analysis
Vertical Analysis: e.g. common-size financial statments
Horizontal Analysis: amounts for several periods are stated in percentages of a base-year amount (i.e. trend percentages)
What is the Foreign Corrupt Practices Act of 1977?
- All public companies must devise and maintain a system of internal accounting control
- No domestic concern may offer or authorize corrupt payments to any foreign official/candidate/country
