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34 Cards in this Set
- Front
- Back
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account form |
- lists assets by sections on the left side - liabilities and stockholders' equity by sections on the right side. |
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activity ratios |
Measures of how effectively a company is using its assets: - receivables turnover, inventory turnover, and asset turnover. |
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adjunct account |
An account that increases either an asset, liability, or owners' equity account. - Opposite of a Contra account - I.E: Premium on Bonds Payable, which, when added to the Bonds Payable account, describes the total bond liability of the company. |
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available-for-sale investments |
Debt securities not classified as held-to-maturity or trading securities: - Reported at fair-value - Do not report changes in fair value as part of net income until after they sell the security. - Interest is recorded when earned. - Unrealized holding gains and losses on available-for-sale securities are recognized as other comprehensive income and as a separate component of stockholders' equity. |
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balance sheet |
Shows the financial condition of a company at the end of a period by reporting its assets, liabilities, and stockholders' equity |
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cash debt coverage |
Measure of solvency that indicates a company's ability to repay its liabilities from cash generated from operations (without having to liquidate productive assets). Net cash provided by operating activities ___________________________________________ average total liabilities. |
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contingency |
Material events with an uncertain future outcome. - Gain (gain contingency) or possible loss (loss contingency) that will ultimately be resolved when one or more future events occur or fail to occur. - Gain contingencies: tax operating loss carryforwards or company litigation against another party. - Loss contingencies relate to litigation, environmental issues, possible tax assessments, or government investigations. |
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contra account |
An account that reduces either an asset, liability, or owners' equity account. - enables readers of financial statements to see the original cost of the asset, liability, or owners' equity account as well as the changes in the account to date. - Opposite of adjunct account |
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coverage ratios |
Measures of the degree of protection for long-term creditors and investors: - Debt to assets ratio, times interest earned, cash debt coverage, and book value per share. |
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current assets |
Cash and other assets a company expects to convert into cash, sell, or consume either in one year or in the operating cycle, whichever is longer. Companies present current assets in the balance sheet in order of liquidity. |
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current cash debt coverage |
Measure of liquidity that indicates a company's ability to pay its short-term debts. Computed as net cash provided by operating activities divided by average current liabilities. |
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current liabilities |
The obligations that a company reasonably expects to liquidate either through the use of current assets or the creation of other current liabilities. |
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financial flexibility |
The ability of a company to take effective actions to alter the amounts and timing of cash flows so it can respond to unexpected needs and opportunities. - Liquidity and solvency affect its financial flexibility. |
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financial instruments |
- Assets consisting of cash, accounts receivable, and ownership interest - a contractual right to receive or obligation to deliver cash or financial instrument |
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financing activities |
- Cash flow activities that include obtaining cash from issuing debt and repaying the amounts borrowed, - obtaining cash from stockholders and paying them dividends. |
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free cash flow |
Measure of the cash remaining from operating activities after adjusting for capital expenditures and cash dividends paid. - takes into account the outflows needed to maintain current operations. |
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held-to-maturity investments |
Debt securities that a company has the positive intent and ability to hold to maturity. |
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intangible assets |
Assets that lack physical substance and that are not financial instruments: - long-term assets. Companies write off (amortize) limited-life intangible assets over their useful lives - periodically assess indefinite-life intangibles (including goodwill) for impairment. |
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investing activities |
Cash flow activities that include (1) purchasing and disposing of investments and productive long-lived assets using cash, and (2) lending money and collecting the loans. |
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liquidity |
An indicator of the speed to which an asset will be realized or otherwise converted into cash or until a liability has to be paid. In general, the greater a company's liquidity, the lower its risk of failure. |
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liquidity ratios |
Measures of a company's short-run ability to pay its maturing obligations. Common liquidity ratios are the current ratio, the quick or acid-test ratio, and current cash debt coverage. |
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long-term investments |
Investments that companies expect to hold for many years. - investments in securities, such as bonds or common stock - investments in tangible fixed assets not currently used in operations, such as land held for speculation - investments set aside in special funds, such as a pension fund; - (4) investments in nonconsolidated subsidiaries. Usually presented just below current assets |
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long-term liabilities |
Obligations that a company expects to pay at some date beyond the normal operating cycle. (more than a year): - bonds payable, notes payable, deferred income tax amounts, lease obligations, and pension obligations. Also referred to as long-term debt. - Companies provide a great deal of supplementary disclosure for long-term liabilities. |
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operating activities |
Cash flow activities include the cash effects of transactions that create revenues and expenses, and thus enter into the determination of net income. |
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owners' (stockholders') equity |
The ownership claim on a company's total asset: - capital stock, additional paid-in capital, and retained earnings. - Partners show separately their permanent capital accounts and the balance in their temporary accounts (drawing accounts). - Proprietors ordinarily use a single capital account that handles all of the owner's equity transactions. |
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profitability ratios |
Measures of the degree of success or failure of a given company or division for a given period of time: - Profit margin on sales, return on assets, return on common stockholders' equity, earnings per share, the price-earnings ratio, and the payout ratio. |
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property, plant, and equipment |
Assets of a durable nature used in the regular operations of the business. Fixed assets all are depreciated except land |
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ratio analysis |
An evaluation of the relationship among selected financial statement data, expressed in terms of either a percentage, a rate, or a simple proportion. |
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report form |
Presentation in a classified balance sheet that lists liabilities and stockholders' equity directly below assets on the same page. |
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reserve |
An appropriation of retained earnings. Also called appropriated earnings. |
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solvency |
The ability of a company to pay its debts as they mature. A company with a high level of long-term debt relative to assets has lower solvency than a similar company with a low level of long-term debt. |
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statement of cash flows |
A basic financial statement that provides information about cash receipts, cash payments, and the net change in cash resulting from the operating, investing, and financing activities of a company during the period, in a format that reconciles the beginning and ending cash balances. |
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trading investments |
Debt securities bought and held primarily for sale in the near term to generate income on short-term price differences. |
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working capital |
The excess of total current assets over total current liabilities; represents the net amount of a company's relatively liquid resources. Also called net working capital. |
