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38 Cards in this Set
- Front
- Back
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What is a liabilitiy?
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A present obligation that grew out of a past event and will require a future sacrifice to extinguish the obligation.
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What is a current liability?
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Also called short-term liabilities. Expected to be paid within one year or the normal operating cycle of the company, whichever is longer. Current liabilities are usually extinguished by payment of current assets.
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What is a long-term liability?
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Not expected to be paid or extinguished within one year.
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What are examples of current liabilities?
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Accounts payable, short-term notes payable, wages payable, warranty liabilities, lease liabilities, taxes payable, unerned revenues.
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Requirements for known liabilites.
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Who will be paid, when it must be paid, and how much to pay.
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Examples of known liabilities.
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Accounts payable, sales taxes payable, unearned revenues, short-term notes payable, payroll liabilities, multi-period known liabilities.
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What is gross pay?
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Earnings before taxes and witholdings.
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What are examples of employee payroll deductions?
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FICA Taxes, Medicare Taxes, federal income tax, state and local income taxes, and voluntary deductions
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What is net pay?
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Earnings after taxes and witholdings.
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What is another word for unearned revenues?
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Deferred revenues, collctions in advance, and prepayments.
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What is another term for known liabilities?
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Definitely determinable liabilities.
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What does FICA stand for?
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Federal Insurance Contributions Act
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Examples of voluntary deductions.
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Union dues, savings accounts, pension contributions, insurance premiums, and charities.
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Another term for paid vacation benefits.
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Paid absences
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What is an estimate liability?
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A known obligation that is of an uncertain amount but that can be reasonably estimated.
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What is a contingent Libaility?
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A potential obligation that depends on a fture event arising from a past transaction or event. i.e. a pending lawsuit
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When are contingent libalities recorded?
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When they are probably, and estimable.
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What are the advantages of bonds?
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Bonds do not affect stockholder control, interest on bonds is tax deductible, bonds can increas return on equity.
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What are the disadvantages of bonds?
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Bonds require payment of both periodic interest and par value at maturity, and bonds can decrease return on equity when the company pays more in interest than it earns on the borrowed funds.
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If the contract rate for a bond is above market rate...
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The bond sells at premium
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If the contract rate for a bond is equal to market rate...
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The bond sells at par value
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If the contract rate for a bond is below market rate...
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The bond sells at a discount
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What are secured bonds?
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Bonds that have specific assets of the issuer pledged as collateral.
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What are unsecured bonds?
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Bonds that are backed by the issuer's general credit standing.
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What are term bonds?
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Bonds that are scheduled for maturity on one specified date.
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What are serial bonds?
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Bonds that have more than one date.
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What are registered bonds?
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Bonds that are issued in the names and addresses of their holders.
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What are bearer bonds?
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Bonds that are payable to whoever holds the bond.
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What are convertible bonds?
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Bonds that can be exchanged for a fixed number of common shares of the issuing corporation.
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What are callable bonds?
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Bonds that have an option exercisable by the issuer to retire them at a state dollar amount prior to maturity.
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Measures of liquidity and efficieny
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Most important to short-term creditors.
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Measures of solvency
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Ability of the company to generate revenues. Important to long-term creditors.
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Measures of profitability.
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Important to manages and outsiders as well.
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Market prospects.
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Important to owners of the company's common shares.
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Horizontal Analysis
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Comparing a company's financial condition and performance across time.
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Verticle Analysis
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Also known as common-size statements. Comparing a company's financial condition and performance to a base amount.
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Ratio analysis
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Measurement of key relations between financial statement items
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Trend Analysis
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Used to reveal patters in data covering successive periods
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