Term
| Debits are an increase to what accounts? |
|
Definition
|
|
Term
| Credits are an increase to what accounts? |
|
Definition
| Liabilities, Equity, Revenue |
|
|
Term
|
Definition
|
|
Term
|
Definition
| current assets - current liabilities |
|
|
Term
| What is a small working capital balance an indication of? |
|
Definition
|
|
Term
| Top five most liquid assets: |
|
Definition
cash
Investments
Raw Materials Inventory
Finished Goods Inventory |
|
|
Term
| Bottom six least liquid assets |
|
Definition
Brand names
Product designs
manufacturing building
headquarters building
manufacturing equipment
office equipment |
|
|
Term
| Where does the value of stock on the balance sheet come from? |
|
Definition
| The original price it sold for on the primary market; DOES NOT MOVE with its market price |
|
|
Term
| Four top concerns of a business |
|
Definition
| liquidity, profitability, growth, and financing |
|
|
Term
| What does the income statement focus on? |
|
Definition
|
|
Term
|
Definition
| goes up and down, depending of something else. It might vary with production or number of employees |
|
|
Term
|
Definition
| earnings before interest and taxes |
|
|
Term
|
Definition
| earnings before interest, taxes, depreciation, and amoritization |
|
|
Term
| Which number do organizations hold their managers to |
|
Definition
|
|
Term
|
Definition
| applying indirect costs to different products |
|
|
Term
| Which margin should managers be held accountable? |
|
Definition
|
|
Term
| Two methods for doing the cash flow statement: |
|
Definition
|
|
Term
| Which is the most common? |
|
Definition
|
|
Term
| What does the operations section give us an idea of? |
|
Definition
| how much cash the organization generated in its day to day delivery of its products and services |
|
|
Term
| Which method (direct or indirect) is most user-friendly? |
|
Definition
|
|
Term
|
Definition
| cash, accounts receivable, inventory |
|
|
Term
|
Definition
| accounts payable, accrued expenses |
|
|
Term
| The Balance Sheet tracks: |
|
Definition
all assets the business holds
amounts the business owes other people
the equity the owners have in the business |
|
|
Term
| the income statement tracks on only what? |
|
Definition
-revenues and expenses (sales and profitability)
-shows how retained earnings is affected by revenues and expenses |
|
|
Term
| the cash flow statement tracks: |
|
Definition
-cash recieved and paid
-how cash has changed over the year |
|
|
Term
| How does the income statement close to the balance sheet? |
|
Definition
|
|
Term
| How is depreciation categorized? |
|
Definition
| as a contra-asset account |
|
|
Term
| depreciation applies to what type of assets? |
|
Definition
|
|
Term
| amortization applies to what type of assets? |
|
Definition
in-tangible
-spreads expenses over a fix period of time |
|
|
Term
| Characteristics of Doubele Entry Accounting System |
|
Definition
-all transactions have two effects on your books
-must balance
-ins=outs |
|
|
Term
| What is the accounting system? |
|
Definition
|
|
Term
| Two components of the accounting system: |
|
Definition
General Journal
General Ledger |
|
|
Term
| Characteristics of the General Journal |
|
Definition
-houses all the transactions
-tells what happened
-Logs the events as journal entries |
|
|
Term
| Characteristics of the General Ledger |
|
Definition
-Houses all the accounts
-Tells what the balance is
-Shows the effect (t-accounts)
-summarized by balance sheet, I/S, SCF |
|
|
Term
| How do creditors own the business? |
|
Definition
| to the extent we have debt (liabilities) |
|
|
Term
| How do the investors own the business? |
|
Definition
| to the extent they contributed capital |
|
|
Term
| How do we own the business? |
|
Definition
| to the extent that we have retained earnings |
|
|
Term
|
Definition
| Revenue-COGS =Operating Profit-Interest/taxes |
|
|
Term
|
Definition
studies the activities and costs involved in each department and allocates them based on the activity that drives (causes) the cost.
-results in a more accurate application of costs to product or division |
|
|
Term
| Characteristics of Direct method of SCF; |
|
Definition
-straightforward, easy to understand
-directly lists cash in and cash out |
|
|
Term
| Characteristics of Indirect method of SCF: |
|
Definition
-not as easy to interpret
-reconcile accrual basis net income to a cash basis |
|
|
Term
| Key question answered by SCF |
|
Definition
| is the NI reported on the I/S ever being realized in cash |
|
|
Term
|
Definition
Managers-generating enough cash to fund
Stockholders(investors)
Suppliers
Employees |
|
|
Term
| Characteristics of Cash Flow from operating activities |
|
Definition
| -most important:how cash is generated and used by the primary activities of the company |
|
|
Term
| Characteristics of CF from investing: |
|
Definition
| -shows CFs from purchasing or selling of long-term assets |
|
|
Term
| Characteristics of CF from financing: |
|
Definition
-debt borrowings and repayments. includes loans and bonds
-selling or repurchasing stock in the company
-paying dividends |
|
|
Term
| ALL transactions affect what? |
|
Definition
|
|
Term
|
Definition
Financial
Managerial
Cost
Budgets
Tax |
|
|
Term
|
Definition
-exteral reporting
-focuses on the past |
|
|
Term
|
Definition
-provides more detail than what is recordced in the GL system
-more timely information
-tells how much it costs to create, market, distribute a product or service |
|
|
Term
|
Definition
| to provide focus and accountability |
|
|
Term
|
Definition
line-item
performance-based
zero-based |
|
|
Term
| Characteristics of publicly traded companies |
|
Definition
-sell stock to the public or sell other securities to the public
-must follow GAAP and file F/S with the SEC
-oversight of the public companies by the SEC |
|
|
Term
| 4 types of audit options: |
|
Definition
unqualified opinion
qualified opinio
disclaimer of opinio
adverse opinion |
|
|
Term
|
Definition
| conform with GAAP; fee from material misstatements |
|
|
Term
|
Definition
-non-pervasive departures from GAAP
-includes the words "except for" |
|
|
Term
|
Definition
-several limitations on the scope of the audit
-if the auditor comes from thecompany |
|
|
Term
| What do the CEO and CFO state when they sign the Signature page? |
|
Definition
-read and understand
-fair presentation of what happened
-ther is nothing misleading in it and nothing important omitted |
|
|
Term
| Punishment for falsifying Signature Page? |
|
Definition
|
|
Term
| Focusing solely on financia lresults leads to what two big problems? |
|
Definition
-wont see trouble coming down the pipeline
-end up focusing on the short-term, ovten to the detriment of long-term strategy |
|
|
Term
| Four categories on the balanced scorecard: |
|
Definition
financial
customer
internal business processes
learning and growth |
|
|
Term
| Characteristics of Growth firms: |
|
Definition
-use more cash than they generate
-focus on growth of sales and market share
-low profits and low cash
-high debt and high capital expenditures |
|
|
Term
| Characteristics of Sustaining firms |
|
Definition
-focus on maintaining profitability and cah flow while cleaning up procedures, expanding cpacity, and relieving bottlenecks
-strong profit and cash flow
-moderate debt and high capital investment |
|
|
Term
| Characteristics of Maturing Firms |
|
Definition
-focus on maximizing cash flow and minimizing investment
-strong profit and cf
-low debt and low capital investment |
|
|
Term
| Two types of Fluctuation (Flux) Analysis: |
|
Definition
|
|
Term
|
Definition
-Common Size
-IS as a % of Revenue
-BS as a % of Total Assets |
|
|
Term
|
Definition
-over time
-base year and then show growth/contraction for all future years
-formula is (new-old)/old |
|
|
Term
| Benchmarks compare company with what? |
|
Definition
-industry averages
-industry best practices
-key competitors |
|
|
Term
|
Definition
-margin
-return metrics
-Shareholder earnings ratios |
|
|
Term
|
Definition
-measures how muc hof our slaes dollars are left after taking out certain expenses.
-given as a percentage of sales |
|
|
Term
|
Definition
-compares profits with the investments that went into creating the profits
-returns are given as a percentage of whatever we invested |
|
|
Term
| Shareholder Earnings Ratios |
|
Definition
| how much are the shareholders earning in terms of a single share of stock |
|
|
Term
| Characteristics of Working captial: |
|
Definition
-money we have tied up in the things you hope to sell
-tells how much money is tied up in daily operations
-LOWER is better |
|
|
Term
|
Definition
-tells us if we have the right amount invested in working capital
-should be 1:1
-if lower than 1:1 than can't pay liabilities as they are due
-if greater that 1:1, we have too much invested in working captial |
|
|
Term
|
Definition
-AKA Acid Test
-tells us how much liquid assets do we have available to pay CL
-how close this is to the current ratio will tel us the impact our investment in inventory has on our ability to pay CL as they become due |
|
|
Term
| Days' Supply of Inventory |
|
Definition
LOWER is better
-High exposes us to risk of loss due to obsolescence/theft/damage |
|
|
Term
|
Definition
How many times we sell our averagge inventory balance
-HIGHER is better |
|
|
Term
| Days' of Receivables(Sales) Outstanding |
|
Definition
|
|
Term
|
Definition
-how many times did we sell and collect our average receivables balance
-Higher is better |
|
|
Term
|
Definition
-how many days does it take to turn an investment in WC into cash
-Puts all three areas of our working captial (cash flow) management together
-LOWER is better |
|
|
Term
|
Definition
Operating Cash index
Cash flow adequacy Ratio
Percentage of Fixed Asset Depreciation |
|
|
Term
|
Definition
-how well we collect cash when making sales
-Higher is better |
|
|
Term
|
Definition
-are we generating enough cash from operations to gorw and keep investors happy
-HIGHER is better |
|
|
Term
| Percentage of fixed asset depreciation |
|
Definition
-How old are the fixed assets
-LOWER is better |
|
|
Term
| Gross Depreciable Fixed Assets= |
|
Definition
| Net Fixed Assets + Accumulated Depreciation - Land |
|
|
Term
| Three types of Financing Ratios |
|
Definition
debt
equity
capital investment |
|
|
Term
|
Definition
how much debt financing do we have compared to equity?
-LOWER is better |
|
|
Term
|
Definition
-debt to total assets
-How much of the company is financed through debt
-LOWER is better |
|
|
Term
|
Definition
-compares cash from operations with cash from external sources (debt and equity)
-Can be found on the SCF
-HIGHER is better |
|
|
