• Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off
Reading...
Front

Card Range To Study

through

image

Play button

image

Play button

image

Progress

1/31

Click to flip

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;

31 Cards in this Set

  • Front
  • Back
What is the definition of an "Asset" ?
Resources controlled as a result of past transactions that are expected to provide future economic benefits.
What is the definition of a "Liability" ?
Obligations as a result of past events that are expected to require an outflow of economic resources.
What is the definition of "Equity" ?
The owners' residual interest in the assets after deducting the liabilities.

Equity isalso referred to as stockholders' equity, shareholders' equity, or owners' equity. Analysts sometimes refer to equity as "net assets."
What are three measures calculated from the balance sheet to ***** a firm?
(1) A firm's liquidity
(2) A firm's solvency
(3) A firm's ability to make distributions to shareholders
What is the difference between "Liquidity" (1) and "Solvency" (2) ?
____1_____ is the ability to meet short-term obligations, while ____2____ is the ability to meet long-term obligations.
Describe the limitations of the balance sheet...
- many valuable assets are not reported for example value of a firm's employees and reputation

- it is at a point in time, and things may have changed.

- "No standard valuation base": not all costs are reported the same, some are reported at amortized cost, others at fair value...
What is a "Classified Balance Sheet" ?

- IFRS or US GAAP?
- A balance sheet format in which assets and liabilities are separated into noncurrent and current.

- Required by both IFRS and US GAAP.
What is a "Liquidity Based Format" ?
- A balance sheet format in which assets and liabilities are presented in the order of liquidity.

- Option under IFRS.
What is a "Report Format" for a balance sheet? ?
Assets, liabilities and equity in a single column
What is an "Account format" of a balance sheet?
Assets on the left, Liabilities & Equity on the right.
What is an "Operating Cycle" ?
the time it takes to produce or purchase inventory, sell the product, and collect the cash.
What items are included under "Current Assets"?

- Current assets reveal information about what ?
- Cash and other assets that will likely be converted into cash or used up within one year or one operating cycle, (Whichever is greater).

- Current assets reveal information about the operating activities of the firm.
What items are included under "Current Liabilities"?
- obligations that will be satisfied within one year or one operating cycle, (Whichever is greater).
- Other possible criteria: Held primarily for trading purposes, no unconditional right to defer settlement for more than one year.
What is "Working Capital" ?

- Working Capital reveals information about what ?
Current Assets - Current Liabilities = Working Capital

- not enough WC may indicate liquidity problems. Too much may indicate inefficient use of assets.
Noncurrent Assets provide information about....
the firm's investing activities, which form the foundation upon which the firm operates.
Noncurrent Liabilities provide information about....
the firm's long-term financing activities.
What are some examples of "Cash Equivalents" ?

At what value are they held on the balance sheet?
Examples: T-Bills, Commercial Paper, MMF's

- Reported on the balance sheet at amortized cost or fair value.
What are "Marketable Securities"?

- Examples?
- financial assets that are traded in a public market and whose value can be readily determined.

Examples: T-Bills, Notes, Bonds, Equity

(Details are enclosed in Financial Footnotes).
What is one of the most common Off-Balance Sheet Assets / Liabilities?
Operating Lease
When listing current assets in order of liquidity, is it most liquid to least or revers?
US GAAP - most to least liquid

IFRS - Least to most liquid
At what value is "Inventory" recorded on the Balance Sheet?

US GAAP ?

IFRS ?
US GAAP: Lower of cost or market value

IFRS: Whichever is lower:
1. Cost (all standard costs of bringing inventory to current location and condition. Excludes storage closts, admin overheads, selling costs)
2. Net Realizable Value
What is "Net realizable value"?
Estimated Selling Price - Estimated Selling Cost.

(What you think you´re going to sell it for less costs of completing the sale.)
At what value is "PP&E" recorded on the Balance Sheet?
Recorded at Purchase cost, including shipping and installation,

or

construction cost including labor, materials, overhead and interest
At what value are "Natural Resources" recorded on the Balance Sheet?
at Depletion. (the allocation of the cost (per unit) of natural resources as they are used)
Owners' Equity includes.... (MEMORIZE THIS!!!)
(1) Contributed Capital (Common Stock)
(2) Preferred Stock
(3) Treasury Stock
(4) Retained Earnings
(5) Noncontrolling (minority) interest
(6) accumulated other comprehensive income
What is "Noncontrolling (minority) interest" ?
The portion of a subsidary that is not owned by the parent.
What exactly is "Retained Earnings" ?
the cumulative undistributed earnings of the firm since
inception.
At what value is "Accounts Receiveable" recorded on the Balance Sheet?
Reported at net realizable value by estimating bad debt expense.
At what value is "Goodwill" recorded on the Balance Sheet?
Goodwill is the excess of purchase price over fair value of identifiable net assets acquired in a business acquisition.

Not amortized but must be tested for impairment at least annually.
Liquidity ratios include:
current ratio, the quick ratio, and the cash ratio
Solvency ratios include:
long-term debt-to-equity ratio, the total debt-to-equity ratio, the debt ratio, and the financial leverage ratio.