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88 Cards in this Set
- Front
- Back
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Change in owners' claims to resources.
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Stockholders Equity
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Profitability of the company
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Income statement
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Change in cash as a result of operating, investing, and financing activities.
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Statement of cash flows
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Resources equal creditors' and owners' claims to those resources.
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Balance sheet
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The change in retained earnings due to net income and dividends.
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Statement of stockholders equity
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Amount of cash received from borrowing money from a local bank.
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Statement of cash flows
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Revenue earned from sales to customers during the year.
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Income statement
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Total amounts owed to workers at the end of the year.
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balance sheet
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Provides measures of resources and claims to those
resources at the end of the year. |
balance sheet
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Provides an indication of the company's ability to make
a profit during the current year. |
income statement
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Provides a measure of net increases and decreases in
cash for the current year. |
statement of cash flows
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Shows changes in owners' claims to resources for the
current year. |
statement of stockholder's equity
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The outline for statement of stockholder's equity
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Beg. balance
Issuance of common stock Add: net income Less: dividends Ending balance |
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Higher cost of goods sold when inventory is rising equals
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LIFO
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When inventory is rising, higher net income equals
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FIFO
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When inventory is rising higher total assets equals
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FIFO
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PIC
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the amount stockholders' have invested in the company
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Treasury stock
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the corporation's own stock that has been reacquired or bought back
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When are current liabilities due?
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Within one year of balance sheet date
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When are long-term liabilities due?
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due beyond one year
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What are some forms of current liabilities?
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Line of credit
Commercial Paper Unearned rev. |
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What are some types of contingent liabilities
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Warranties
Premium or coupons offers Lawsuits |
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Probable?
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Estimate the amount of the contingency and make the appropriate journal entry; provide detailed disclosure in the notes
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Possible?
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Provide detailed disclosure in the possible liability in the notes
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Remote
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No disclosure required
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Liquidity
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Ability to pay debts when they are due
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Days payable outstanding
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Indicates how quickly a company is paying its vendors (in # of days)
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Typical long term liabilities
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Bonds payable
Notes payable (> one year) Capital Leases Deferred taxes Pensions Postretirement benefits |
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What is a bond?
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long term borrowing arrangement
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When is the principal repaid on a bond?
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maturity date
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Leases?
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Contractual agreement; form of financing
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Capital lease
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record as asset on balance sheet along with corresponding liability
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Operating lease
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recorded as rent expense, referred to as "off balance sheet" financing
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Leverage/Solvency
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ability to stay in business over the long term
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What ratios show leverage/solvency?
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Debit ratio
Times interest earned Debt-to-equity Financial leverage |
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Debt ratio
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what percent of assets have been financed by debt
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Debt-to-equity ratio
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how much have creditors contributed compared to owner
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Times interest earned ratio
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will they be able to pay the interest on the debt
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Financial leverage
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is the company employing debt successfully?
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Outstanding shares
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issued-treasury stock
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Treasury stock
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contra asset
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Stock dividends
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increases # of issued/outstanding stocks && reduces retained earnings/increases common/ add. pic stock
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Stock splits
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Reduces par value && has no effect on retained earnings or common stock
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Price earnings ratio
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Very high= possibly over priced
Very low= possibly underpriced |
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Dividend payout ratio
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decides what percentage of income the firm returns to owner
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Dividend yield ratio
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is usually less than 5%
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Market value
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price at which stock is currently selling; 52-week period
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Outstanding shares
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issued-treasury stock
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Treasury stock
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contra asset
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Stock dividends
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increases # of issued/outstanding stocks && reduces retained earnings/increases common/ add. pic stock
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Stock splits
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Reduces par value && has no effect on retained earnings or common stock
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Price earnings ratio
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Very high= possibly over priced
Very low= possibly underpriced |
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Dividend payout ratio
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decides what percentage of income the firm returns to owner
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Dividend yield ratio
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is usually less than 5%
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Market value
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price at which stock is currently selling; 52-week period
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FL ratio
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FL of 1.0= no debt financing
FL > 1.0 = debt financing |
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Net profit margin
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efficiency in generating profit from sales
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Total asset turnover
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efficiency in managing all assets
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Return on assets
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overall efficiency in managing assets and generating profit
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Operating activities in SCF
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Sales/collection of A/R
Purchase/payment of inventory Payment of taxes/wages |
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Indirect method equation
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Net income
+depreciation and amortization +loss on sale of assets -gains on sale of assets +decreases in CA -increases in CA +increases in CL -decreases in CL ====net cash flow |
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Investing activities in SCF
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Purchase/sale of PP&E
Capital expenditures Purchase/sale of available for sale securities |
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Financing activités are
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Cash transactions concerned with the raising and repayment of funds in the form of debt and equity
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Financing activities in SCF
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Issuance of stock
Payment of dividends Repurchase/reissuance of treasury stock Issuance/repayment of bank note/notes payable Issuance/retirement bonds |
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Statement of cash flows
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Operating
Investing Financing Net increase (decrease) in $ Cash--beginning of yr Cash--end of yr |
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Non-cash investing/financing activities
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Building/equipment:
purchased with L/T n/p purchased with stock Stock dividend/split |
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OCF +
ICF - FCF + |
Company is prosperous
Growing by investing in L/T assets/investments with CFO and cash provided by financing activities. Accumulating cash by borrowing $ or sell stock |
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Horizontal analysis
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(CY-PY)/PY
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L: Days payable outstanding
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A/P/Average daily COGS: days required to pay suppliers/vendors
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L:Trend for current ratio?
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want to increase to 3
normally 2.0 |
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L: Quick ratio trend
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want to increase
normally 1.0 |
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L: Avg Collection period trend
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want to decrease
normally 30 days |
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L: # of days sales inventory trend
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want to decrease
normally 7 days |
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L: A/P days outstanding
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want to increase
normally 30 days |
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Cash conversion cycle is a measure of
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liquidity
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E: Inventory turnover trend
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normally 12 times a year
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Fixed asset turnover and total asset turnover are measures of
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efficiency
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Leverage ratios
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Debit ratio
Debit to equity Times interest earned Free cash flow cash flow adequacy Financial leverage |
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GPM trend
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want to increase
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NPM trend
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want to increase
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ROE
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want to be high
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Profitability ratios
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GPM
OPM NPM Cash flow to net income ROA ROE |
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What is the difference between the indirect method and the direct method?
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the operating section
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Cash ROA should be higher than
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CFO
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Marketable securities are
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short term investments
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What does internal financing mean?
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reinvested
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Market value is
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replacement cost (not retail value)
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Total stockholders' equity
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common stock
addt pic retained earnings (treasury stock) |
