Unit 7: Financial Reporting

Question 1

Balance Sheet

Answer 1

Financial position at specific point in time

Question 2

Owners Equity

Answer 2

Assets - Liabilities

Question 3

Current Liabilities

Answer 3

Under 12 months
-Accts & wages payable
-Notes
-Taxes
-Current servicing of long term debt

Question 4

Long-term Liabilities

Answer 4

Greater than 12 months
-Bonds
-Mortgages

Question 5

Types of owners equity (shareholder equity)

Answer 5

Capital Stock at par-matters for preferred shares
Capital in excess of par-matters for common
Retained earnings-profits not paid out in dividends

Question 6

Capital Structure

Answer 6

A company’s combination of equity and debt
-will show up on balance sheet

Question 7

Declaring dividend

Answer 7

retained earnings decrease
liabilities increase
net worth equal

Question 8

Paying dividend

Answer 8

cash decreases
liabilities decrease
net worth decrease

Question 9

Highly leveraged

Answer 9

over 50% debt to equity
(if utilities or other stable co, over 50% is not considered highly leveraged)

Question 10

Eliminating debt at price above par

Answer 10

does not increase equity

Question 11

Income statement

Answer 11

revenue and expenses for a period of time
-revenue, cost of goods sold, pre-tax income

Question 12

Dividends/interest and taxes

Answer 12

dividends taxed twice (after tax funds, and taxed by recipient)
interest taxed once (before tax funds, but taxed by recipient)

Question 13

fiscal year

Answer 13

period in which income statement represents, usually different than calendar year.

Question 14

Audited statements

Answer 14

reviewed by independent auditor

Question 15

Unaudited statements

Answer 15

are for business operating purposes

Question 16

Audited statement footnotes

Answer 16

will include significant info on accounting methods and/or management processes.

Question 17

Cash flow

Answer 17

three categories-
from operating activities, investing activities, and financing activities

Question 18

CF from Operation

Answer 18

includes receipt of dividends and interest
for net income- add depreciation and amortization back
involves income statement

Question 19

CF from Investing

Answer 19

indirect from ongoing business

Question 20

CF from Financing

Answer 20

payment of dividends
involves balance sheet

Question 21

Form 8K

Answer 21

news worthy reports, must be reported in 4 business days

Question 22

Form 10K

Answer 22

Annual report on overall condition

Question 23

Annual report to stockholders

Answer 23

Professionally prepared and most detailed publication on company
-but they are allowed to simply use Form 10K

Question 24

Form 10Q

Answer 24

unaudited quarterly reports

Question 25

Filing quarterly and annual reports mandated by

Answer 25

Securities Exchange Act 1934

Question 26

Net change in cash position on Income Statement is

Answer 26

total cash flow from operations, investing and financing

Question 27

Gross margin/profit

Answer 27

Revenue (or sales) - COGS