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41 Cards in this Set
- Front
- Back
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Current ratio
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Current assets/current liabilities
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Inventory turnover ratio
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COGS/ average inventory
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Average days supply in inventory
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365(days in year)/inventory turnover ratio
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Earnings per share (EPS)
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net income / average # of shares of common stock outstanding
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P/E (price /earnings) ratio
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current market price per share/earnings per share
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Debt–to-Equity ratio
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total liabilities/stockholders equity
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Revenue principle
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Revenues are recorded when they are earned
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Matching principle
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expenses are recorded when they are incurred to generate revenue
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Accrual basis accounting
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records revenues when earned and expenses when incurred, regardless of the timing of cash receipts or payments
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Accrued revenues
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previously unrecorded revenues that need to be adjusted at the end of the accounting period to reflect the amount earned and the related receivable account
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Accrued expenses
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previously unrecorded revenues that need to be adjusted at the end of the accounting period to reflect the amount earned and the related receivable account
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Deferred expenses
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previously acquired assets that need to be adjusted at the end of the accounting period to reflect the amount of expense incurred in using the asset to generate revenue
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Deferred (unearned) revenue
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previously recorded liabilities that need to be adjusted at the end of the accounting period to reflect the amount of revenue earned
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Gross profit
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net sales – COGS
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Gross profit percentage
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gross profit / net sales
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Calculating depreciation expense using straight-line depreciation
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Depreciation expense = (cost – residual value) * (1/useful life)
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Calculating depreciation expense units – of – production method
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Depreciation expense = ((cost – residual value)/estimated total production) *
(actual production) |
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Calculating depreciation expense using double – declining balance depreciation
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Depreciation expense = (cost – accumulated depreciation) * 2/useful life
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Contingent liability
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potential liability that has arisen as the result of a past event; it is not effective liability until some future event occurs
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Net profit margin
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(Net income /revenue) * 100
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Net Income
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revenue - cost
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Return on assets
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Net income / mode of total assets
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Net sales
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Gross sales - (customer discounts, returns, allowances)
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When using the allowance method, bad debt expense is recorded....
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total assets decrease and stockholders equity decreases
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What does a NSF check cause to the balance per books and the balance per bank statement?
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Decreases the balance per books
Remains the same in the balance per bank statement |
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When using the allowance method, when a company writes off an account receivable, what is effected?
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Total assets, total expenses, and total stockholders equity all remain the same
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COGS
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(Beginning inventory + purchases) - ending inventory
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An increasing inventory turnover ratio...
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indicates a shorter time span between the purchase and sale of inventory
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Which inventory method provides a better matching of current costs with sales revenue in the income statement and outdated values for inventory on the balance sheet?
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LIFO
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Direct method
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Cash basis method of net income
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Indirect method
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method for creating a statement of cash flows a company may use during any given reporting period. The indirect method uses accrual accounting information to present the cash flows from the operations section of the cash flow statement.
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Credits in the accounts receivable account during a period represent...
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Cash collected
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Investing activities
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Selling long term assets/investments
-buying long term assets/investments ___________________ Cash flows from investing **noncurrent assets |
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Financing activities
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Issuance of debt/stock
-retirement of debt/stock -buy back stock -pay dividends ______________ cash flows of financing **noncurrent liabilities **contributed capital **dividends **current liability - short term debt |
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Operating activities
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Net income
+loss -gain +depreciation and amortization -increase in current assets +decrease in current assets +increase in current liabilities -decrease in current liabilities _________________________ cash flows from operations |
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Which of the following is the best measure of a companies profitability?
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Accrual based net income
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The purchase of an intangible asset provides a _________ to net ash flow provided by ________ activities.
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Decrease, investing
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Purchases of stock in other corporations is a ______ activity
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Investing
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An increase in accounts payable is considered a...
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Operating activity
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When calculating net cash flow provided by operating activities, an increase in accounts payable is ______ net income because payments to suppliers are ______ than new purchases
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added to, less
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Subtracting a _______ in inventory from net income allows the inclusion of transactions that decrease cash but do not impact net income
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increase
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