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17 Cards in this Set
- Front
- Back
- 3rd side (hint)
What is the purpose of accounting?
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To measure business activities and results for stakeholders.
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What is the purpose of an Income Statement?
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An income statement shows sales/expenses and if the business has made a profit over a period of time.
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What does the Balance Sheet do?
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A balance sheet indicates assets/liabilities and the amount invested in a company at a particular point in time.
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What is a Cash Flow statement?
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Shows how much cash comes in and out of a firm.
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What's an asset?
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Things of value that a firm owns
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What is a liability?
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A firm's debs and obligations
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What is the owner's equity?
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The owner's investment (wealth created within the firm)
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How are assets grouped on a Balance Sheet?
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Current: convert to cash within a year
Long term: intend to hold for more than a year |
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How are liabilities grouped on a Balance Sheet?
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Current: pay off within a year
Long term: Not due for more than a year |
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How do you calculate NET profit margin?
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Net Profit / Sales (this tells us how many pennies of profit for each dollar generated)
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How do you calculate gross profit ratio?
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Gross Profit Margin / Sales
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This tells us the proportion of sales left after paying for production. This portion must cover operation costs and selling expenses.
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How do you calculate Current Ratio?
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Current Assets / Liabilities
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This tells us whether or not a firm can pay its bills in the short term. A ratio of 2 or more is preferred by banks.
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How do you calculate debt to equity ratio?
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Total Debt to Equity = Total Liabilities / Total Equity
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This tells us whether the firm has grown mostly with funds obtained by borrowing or by contributions from owners.
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What are some personality traits of entrepreneurs?
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Open-mindedness and adaptability, confidence, ambition, drive, perseverance, patience, ability to communicate and deal with people, self motivation
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What is under-capitalization?
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Business doesn't have enough money to success, and it's losing money before it even has a chance
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What is GAAP?
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Generally accepted accounting principals
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What is Sarbanes-Oxley?
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The primary focus of Sarbanes-Oxley was to improve the accuracy of financial information disclosed by U.S. public companies and foreign companies with a U.S. presence. SOX also provided for civil and criminal penalties for violations of the Act.
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