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22 Cards in this Set
- Front
- Back
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congingent liability
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a potential liability that has arisen as a result of a past transaction or event. ultimate outcome is unknown until a future event occurs or fails to occur. It it is probable and estimateable, it should be recorded
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current ratio
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current assets/current liabilities
how well a company is able to use its current assets to pay its current liabilities Liquidity |
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times interest earned ratio
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(net income+interest exp+income tax exp)/int exp
the amount of income generated by the company before interest and taxes for each dollar of int exp Solvency |
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benefits of owning common stock
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1.voting
2.dividends 3.residual claim |
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par value
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an insignificant value per share of capital stock specified in the charter; serves as the basis for legal capital
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no-par value stock
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capital stock that has no par value specified n the corporate charter
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why would a company want to repurchase its stock
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1.to signal co. believes its own stock is worth purchasing
2.to obtain shares to reissue as payment for purchases of other co.s 3.shares to reissue to employees |
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what is it called when co.s issue stock to remind stockholders of accumulating wealth?
does par value change? how do you record it? |
small stock dividend, par value does not change
dr RE market price cr Com Stock par value cr add. paid in cap diff. |
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issueing stock to reduce market price per share without a change in par value
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large stock dividend
dr RE par value cr Com Stock par value |
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stock issued to reduce market p/s with a change in par value
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stock split
no journal entry, change par value and # of shares authorized/outstanding |
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preferred stock
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1.no voting rights
2.less risky, paid dividends first and first at liquidation 3.fixed dividend rate |
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cumulative unpaid dividend amounts
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dividends in arrears
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earnings per share
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net income/ave # of com shares outstanding
amount of income generated for each share of com stock Profitability |
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return on equty
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net income/ave stockholders equity
profitability takes cost of stock into consideration |
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what are cash equivalents
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highly liquid investments with original maturities of less than three months
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investing activies on cash flow statement
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payments and proceeds for/from fixed assets and investments
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cash flows from financing activities
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cah proceeds from issuance of debt and common stock
cash prinicipal payments on debt, repurchase of stock, dividends (interest is operating cash flow) |
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capital acquisitions ratio
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net cash flow from op. activies/cash paid for PPE
the portion of PPE financed from op. activities without need for financing solvency |
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cash coverage ratio
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cash flow from op. activities +interest paid+income taxes paid/interest paid
amount of cash generated for each dollar of interest paid Solvency |
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quality of income ratio
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net cash flow from op. activities/net income
portion of income generated in cash high indicate likelihood that revenues being realized in cash and that expenses are associated with cash outflows profitability |
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future value
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PV(1+interest rate)^n
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present value
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FV/(1+interest rate)^n
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