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25 Cards in this Set
- Front
- Back
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what are the advantages to having a corporation?
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limited liability
ability to raise capital lack of mutual agency |
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what are the disadvantages to having a corporation?
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double taxation
more paperwork |
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what is authorized stock?
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total number of shares available to sell
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what is issued stock?
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number of shares sold to investors
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what is outstanding stock?
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number of shares held by investors
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how to record the issuance of stock for cash
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cash debit 30000
common stock credit 30000 |
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how does treasury stock affect stockholders equity?
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reduces SE
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what are the 3 dates for cash dividends?
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declaration date
record date payment date |
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What 2 dates require entries?
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declaration and payment
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what are the effects of a stock split?
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doesnt require an entry (like slicing a pizza, its the same amount)
no affect on any account |
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what is a stock dividend? what does it do?
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shares of stock given to stockholders instead of cash
used to reduce market price/retained earnings |
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how do we record a stock dividend?
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cash debit 30000
minus common stock (# of shares x par value) |
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how do we use earnings per share?
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it is useful in comparing earnings performance for the same company over time
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What is the statement of cash flows?
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summarizes inflows and outflows of cash in a period
reconciles change in cash |
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What is the relationship between the balance sheet and the statement of cash flows?
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current assets and liabilities = operating
long term assets = investing long term liabilities and stockholders equity = financing |
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how do we prepare operating activities?
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indirect method
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What are the steps to preparing the statement of cash flows?
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net income + depreciation
changes in assets have opposite effect changes in liabilities have the same effect |
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what is vertical analysis?
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express each item in a financial statement as a percent of the same base amount
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what is horizontal analysis?
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analyze trends in financial data for a single company over time
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What is liquidity?
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a companys ability to pay current liabilities
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What is solvency?
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a companys ability to pay their long term assets
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What is the profitability ratio?
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used to measure earnings or operating effectiveness of a company
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What is the profit margin formula?
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net income/sales
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What is discontinued operation?
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sale or disposal of a significant component of a companys operations
only record it for the current year (ex. updated tech) |
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What is an extraordinary item?
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unusual in nature
infrequent in occurance (ex. hurricane, earthquake) |
