Accounting

Front 1

Income statement

Back 1

AKA statement of earnings, measures firms change in wealth

Front 2

Income statement formula

Back 2

Revenues-Expenses=Net Income

Front 3

What is the minimum years required on the income statement by the SEC ?

Back 3

three years

Front 4

Formula for Growth Rate

Back 4

TY-LY/LY=Growth Rate

this year minus last year divided by last year equals the growth rate

Front 5

What are costs of goods sold?

Back 5

Cost of good sold aka cost of sales - directly related to product (Raw materials, labor ,utility -factory space)

Front 6

What are operating expenses?

Back 6

SGA (selling and general administrative expenses) - marketing and sales commission

Front 7

Revenue recognition?

Back 7

recognize revenue when it is realized or realizable and earned.

Front 8

Revenue is Realized?

Back 8

when products(good and services), merchandise or other assets are exchanged for cash or claims to cash(sold goods)

Front 9

Revenue is Realizable?

Back 9

when related assets received or held are readily convertible to known amounts of cash or claims to cash(inventory)

Front 10

Depreication methods and formula

Back 10

straightline, accelerated (more conservative)
cost-salvage value/useful life=amount item depreciates each year

Front 11

Operating profit

Back 11

provides basis for assessing the success of a company apart from its financing and investing activities and seperate from tax considerations

Front 12

Operating profit Margin

Back 12

operating profit/net sales

Front 13

Equity method for recording investments in other companies with less than 50% voting stock

Back 13

proportionante recognition of investees net income, irrespective of cash dividends.

Front 14

Cost method of recording investments in other companies

Back 14

investor recognizes investment incomve only to the extent of any cash dividends recieved

Front 15

Critique of equity method

Back 15

equity method distorts earning in the sense that income is recognized even though no cash may ever be recieved.

Front 16

The statement of cash flows is ?

Back 16

A finnacial statement that proviceds information about inflows and outflows of cash during an accounting period

Front 17

Change in accounting period equals?

Back 17

total inflows- total outflows

Front 18

how do you get more cash?

Back 18

sell more product, decrease cost, make credit policy more restrective

Front 19

Parts of statment of cash flows?

Back 19

Cash, operating activities, investing activities, financing activities

Front 20

whats considered cash?

Back 20

cash equivalents (short-term marketable securites), t-bills, CD's, Commercial paper (GE-GM)

Front 21

Examples of cash flows?

Back 21

Sales fo goods- cash from customers, purchase of inventory- cash from suppliers, payments of operating expenses.

Front 22

Investing activities are and include?

Back 22

are longterm assets,for example: acquiring/ disposing of other companies securities (that are not cash equivalents) , acquiring/disposing of productive assets , lending money and collecting on loans

Front 23

Financing activities are associated with?

Back 23

Longterm Liabilities and stockholders equity;

Front 24

Financing activities are?

Back 24

Borrowing from creditors/repaying the principal, obtaining resources from owners, providing owners with a return on investment (dividends, repurchase)

Front 25

What is the importance of the statement of cash flows?

Back 25

Indicates firm's ability to generated cash flows in the future, capacity to meet cash obligations, future external financing, success in productivity managing investing activities, effectiveness in implementing financing and investing stragtegies.

Front 26

What are the categories of ratios?

Back 26

activity, liquidity, leverage and profitability

Front 27

Activity

Back 27

how effecient is the companies operations and the firms management of assets

Front 28

Leverage

Back 28

solvency, how well is the firm positioned to meet long-term obligations

Front 29

liqiudity

Back 29

how well is the firm positoned to meet short term obligations

Front 30

profitability

Back 30

how much and how is the firm acheiving returns on their investments

Front 31

(average collection period)Days receivable =
Accounts Receivable / (Net sales/365)

Back 31

Days it takes receivables to turn into cash

Front 32

Cash cycle Formula

Back 32

Cash cycle=average collection period+ days inventory held- days payable outstanding

Front 33

Days inventory held = inventory/average daily cost of goods sold

Back 33

days required to sell through all inventory

Front 34

Days payable =accounts payable/average daily cost of goods sold

Back 34

average number of days to pay suppliers

Front 35

Asset turnover

Back 35

Sales/average total assets .....how many dollars of sales was the firm able to generate from each dollar of assets

Front 36

Current ratio meausres?

Back 36

how well the company is positioned to meet their near term obligations. current assets/current liablities

Front 37

What is the quick ratio?

Back 37

Cash+ short term investments+ accounts recievable/ current liabilities

Front 38

ROA formula?

Back 38

Net income(sometimes adjusted for interest)/average total costs

Front 39

ROE formula

Back 39

net income/average total equity

Front 40

Return on common equity

Back 40

net income -(preferred dividends) /average common equity