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Exam #2
n/a
37
Accounting
Undergraduate 1
10/24/2011

Additional Accounting Flashcards

 


 

Cards

Term
permanent accounts
Definition
balance sheet accounts balances carry forward from year to year
Term
temporary accounts
Definition
income statement accounts, withdrawals account balances are moved each year (added or subtracted from Owner's Equity)
Term
dual effect of transactions
Definition
when one account changes, another account (or accounts) must change so that the equation remains the same
Term
profit margin =
Definition
net income/net sales
Term
gross profit percentage =
Definition
gross profit / net sales
Term
goals of "closing entries"
Definition
"zero out" temporary accounts (revenue, expense, and withdrawal) so they can be used to count next periods' r, e, w

update owner's capital account
Term
types of assets
Definition
current
long-term
property and equipment
intangible
Term
current assets
Definition
resources the company expects to use up or turn into cash during the next year
Term
long-term investments
Definition
marketable securities the company intends to hold for more than one year
Term
property and equipment
Definition
physical assets the company uses in its operations for more than one year
Term
intangible assets
Definition
long-term assets that do not have a physical substance
Term
types of liabilities
Definition
current
non-current
Term
current liabilities
Definition
debts or obligations the company expects to pay off or satisfy within the next year
Term
noncurrent liabilities
Definition
debts or obligations the company does NOT expect to pay off or satisfy within the next year
Term
owner's equity
Definition
the owner's current investment in (or claim to) the assets of the company
Term
current ratio =
Definition
current assets / current liabilities

evaluates liquidity
Term
quick ratio =
Definition
quick assets / current liabilities

evaluates liquidity
Term
debt ratio =
Definition
total liabilities / total assets

evaluates financial flexibility
Term
return on total assets
Definition
(net income + interest expense) / average total assets

evaluates profitability
Term
return on owner's equity =
Definition
net income / average owner's equity

evaluates profitability
Term
inventory turnover =
Definition
COGS / average inventory

evaluates operating capability
Term
# days in selling period =
Definition
# days in business year / inventory turnover

evaluates operating capability
Term
accounts receivable turnover =
Definition
net credit sales/ average accounts receivable

evaluates operating capability
Term
# days in collection period =
Definition
# days in business year / accounts receivable turnover

evaluates operating capability
Term
working capital =
Definition
current assets - current liabilities

evaluates liquidity
Term
why cash flow statement is important

(1) changes in cash balance from
Definition
1) shows changes in company's cash balance during the accounting period from:

operating activities
investing activities
financing activities
Term
why cash flow statement is important

(2) provides information about
Definition
a company's ability to remain solvent
Term
why cash flow statement is important

(3) provides information to
Definition
help assess a company's need for additional financing or its ability to make additional investments
Term
Cash flows from OPERATING activities can be broken up into:
Definition
cash inflows
cash outflows
Term
OPERATING: Cash Inflows
Definition
- collections from customers
- collections of interest
- other operating receipts
- cash inflows from operating activities
Term
OPERATING: Cash Outflows
Definition
- payments to suppliers
- payments to employees
- other operating payments
- cash outflows for operating activities
Term
INVESTING
Definition
- payments for property and equipment
- payments for investments in stocks and bonds
- receipts from sale of P&E
- receipts from sale of investments in stocks and bonds
Term
FINANCING
Definition
- receipts from issuance of notes and bonds (IOUs)
- receipts from sale of company's own stock ("owner investment")
- payments of notes and bonds
- payments to reacquire company's own stock
- payments of dividends (owner withdrawl)
Term
Operating cash flow margin =
Definition
net cash flow from operating activities / net sales
Term
net cash flow from cash return on total assets =
Definition
(Operating activities + interest paid) / net sales
Term
cash return on owner's equity =
Definition
net cash flow from operating activities / average owner's equity
Term
operating cash flow margin =
Definition
net cash flow from operating activities / net sales
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