Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
61 Cards in this Set
- Front
- Back
|
Current Ratio:
|
current assets/current liabilities
|
|
|
Quick Ratio
|
(cash+short term investments+net current receivables)/current liabilities
|
|
|
Debt Ratio
|
total liabilities/total assets
|
|
|
Ratio type: current ratio
|
Liquidity ratio--Indicates abilty to pay current liabilities
|
|
|
Ratio type: quick ratio
|
Liquidity ratio--Indicates abilty to pay current liabilities
|
|
|
Ratio type: Debt Ratio
|
Leverage ratio-indicates ability to pay long term debt
|
|
|
Times interest earned ratio:
|
income from operations/interest expense
|
|
|
Ratio type: Times interest earned ratio
|
Leverage ratio-indicates ability to pay long term debt
|
|
|
Gross Profit Percentage
|
gross profit/net sales revenue
|
|
|
Ratio type: Gross Profit Percentage:
|
Profitability ratio--indicates gross profit as a percent of net sales
|
|
|
Inventory Turnover Ratio:
|
cost of goods sold/average inventory
|
|
|
Ratio type: Inventory Turnover Ratio
|
Ability to sell inventory
|
|
|
Return on Assets:
|
net income+interest expense/average total assets
|
|
|
Ratio type: Return on Assets:
|
Profitability ratio
|
|
|
Ratio type: Earnings per share:
|
Profitability ratio
|
|
|
Earnings per share:
|
(Net income - preferred dividends)/Average number of shares of common stock outstanding
|
|
|
Activities affecting long-term assets are
|
Investing activities
|
|
|
Income Statement
|
Reports revenues and expenses for the period. Bottom line is net income or net loss.
|
|
|
What statement is COGS found on?
|
Income Statement
|
|
|
What is the single most important item in the financial statements?
|
Net income
|
|
|
What is the order of the financial statements?
|
1. income statement
2. Statement of retained earnings 3. Balance sheet 4. Statement of cash flows |
|
|
What is the balance sheet?
|
List of an entity's assets, liabilities, and owners' equity as of a specific date.
|
|
|
What is the statement of cash flows?
|
Reports cash receipts and cash payments classified according to the entity's major activities: operating, investing, and financing.
|
|
|
What is the statement of retained earnings?
|
Summary of the changes in the retained earnings of a corporation during a specific period.
|
|
|
What is another name for the income statement?
|
The statement of operations.
|
|
|
What is the stable monetary unit concept?
|
The reason for ignoring the effect of inflation in the accounting records, based on the assumption that the dollar's purchasing power is relatively stable.
|
|
|
Accounting information is subject to the constraints of
|
materiality and cost.
|
|
|
A partnership has
|
mutual agency.
|
|
|
True or false: A partnership is a taxpaying entity
|
False
|
|
|
A listing of all the charts that make up the ledger is called
|
the chart of accounts
|
|
|
True or false: The balance sheet is the last financial statement to be prepared, after the income statement and the statement of RE.
|
True
|
|
|
Under the allowance method, the entry to write off a $2,600 uncollectable account includes a
|
debit to Allowance for Uncollectable accounts for $2,600
|
|
|
If goodwill has decreased in value, it is said to be
|
Impaired
|
|
|
True or false: Gains on the sale of equipment increase net income while losses on the sale of equipment decrease net income.
|
True
|
|
|
What type of lease will NOT increase a company's assets or long-term liabilities?
|
An operating lease
|
|
|
A company wishing to maximize earnings per share would
|
issue bonds
|
|
|
Short-term investments are also called
|
marketable securities
|
|
|
Marketable securities are also called
|
Short-term investments
|
|
|
We report trading investments on the balance sheet at
|
their current market value
|
|
|
Allowance for bad debts is a contra account to
|
Accounts receivable
|
|
|
The acid-test ratio is also known as
|
the quick ratio. Helps to measure liquidity.
|
|
|
The balance sheet lists assets in the order of
|
relative liquidity
|
|
|
Gross profit formula
|
Net sales - COGS
|
|
|
What is freight in
|
The cost to transport the goods from seller to buyer
|
|
|
Net sales formula
|
Sales revenue - sales returns and allowances - sales discounts
|
|
|
Consistency principle
|
Businesses should use the same accounting methods and procedures from period to period.
|
|
|
Disclosure principle
|
A company's financial statements should report enough information for outsiders to make informed decisions about the company.
|
|
|
Conservatism
|
Reporting financial statement amounts that paint the most cautious or moderate immediate picture of the company.
|
|
|
On the balance sheet, the business reports ending inventory at
|
LCM value
|
|
|
True or false: LCM is not required by GAAP.
|
False
|
|
|
Goodwill
|
The excess of the cost of purchasing another company above the sum of the market values of the acquired company's net assets (assets - liabilities)
|
|
|
The declining value of an asset is called
|
an impairment
|
|
|
Capital lease
|
Long-term noncancelable debt.
|
|
|
Operating lease
|
Are sometimes short-term or cancelable.
|
|
|
What are the 3 dates associated with dividends?
|
Date of declaration, date of record, and payment date.
|
|
|
When do dividends affect liabilities?
|
date of declaration
|
|
|
Operating activities
|
Create revenues, expenses, gains, and losses--net income, which is a product of accrual-based accounting.
|
|
|
Investing activities
|
Increase and decrease long-term assets, such as computers, land, buildings, equipment, and investments in other companies.
|
|
|
Financing activities
|
Obtain cash from investors and creditors.
|
|
|
Indirect method
|
reconciles from net income to net cash provided by operating activities.
|
|
|
Direct method
|
Reports all cash receipts and payments from operating activities.
|
