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Definition
| a balance sheet that contins a number of standard classifications and sections |
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| ability t compare the accounting information of different companies because they use the samea ccounting principles |
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| the approach of choosing an accounting method, when alternatives exist, that will least likely overstate assets and net income |
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| use of the same accounting principles and methods from year to year within a com pany |
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| an accounting principle that states that companies should record assets at their cost |
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| cash and other resources that companies reasonably expect to convert to cash or use up within one year or the operating cycle, whichever is longer |
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| obligations that a company reasonably expects to pay within the next year or operating cycle, whichever is longer |
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| a measure used to evaluate a company's liquidity and short-term debt-paying abilities; computes as current assets divided by current liabilities |
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| debt to total asset ratio |
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Definition
| measures the percentage of total financing provided by creditors; coputed as total debt divided by total assets |
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| a measure of the net income earned on each share of common stock; computed as net income minus preferred stck dividends divided by the average number of common shares outstanding during the year |
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| economic entity assumption |
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Definition
| an assumption that every economic entity can be separately identified and accounted for |
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| financial accouning standards board (FASB) |
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Definition
| the primary accounting standard-setting body in the United States |
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| financial accouning standards board (FASB) |
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Definition
| the primary accounting standard-setting body in the United States |
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Definition
| cash remaining from operating activities after adjusting for capital expenditures and dividends paid |
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| full disclosure principle |
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Definition
| accounting principle that dictates that companies disclose circumstances and events that make a difference to financial statement users |
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| Generally accepted accounting principles (GAAP) |
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Definition
| a set of rules and practices, having substantial authoritative support, that the accounting profession recognizes as a general guide for financial reporting purposes |
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Definition
| the assumption that the company will continue in operation for the foreseeable future |
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| assets that do no have physical substance |
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| international accounting standards board (IASB) |
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Definition
| an accounting standard-setting body that issues standards adopted by many countires outside of the US |
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Definition
| the ability of a company to pay obligations that are expected to become due within the next year or operating cycle |
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Definition
| measures of the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash |
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Term
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Definition
| generally, (1) investments in stocks and bonds of other corporations that companies hold for more than on year, and (2) long-term assets, such as land and buildings, not currently being used in the company's operations |
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Term
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Definition
| obligations that a company expects to pay after one year |
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Definition
| the constraint of determining whether an ite is large enough to likely influence the decision of an investor or creditor |
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Definition
| an assumption that requires that only those things that can be epxressed in money are included int he accounting records |
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Definition
| the average time required to go from cash to cash in producing revenues |
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Definition
| measures of the operating success of a company for a given period of time |
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Term
| property, plant, and equipment |
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Definition
| assets with relatively long useful lives that companies use in operating the businesss and are not intended for resale |
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Term
| public company accounting oversight board (PCAOB) |
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Definition
| the group charged with determining auditing standads and reviewing the performance of auditing firms. |
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Term
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Definition
| he quality of information that indicates the information makes a difference in a decision |
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Definition
| the quality of information that gives assurance that it is free of error, is factual, and is neutral |
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Term
| securities and exchange commission (SEC) |
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Definition
| the agency of the US government that oversees US financial markets and accounting standard-setting bodies |
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Definition
| the ability of a company to pay interest as it comes due and to repay the balance of debt at its maturity |
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Definition
| measures of the ability of the company to survive over a long period of time |
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Term
| statement of stockholders' equity |
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Definition
| a financial statement that presents the factors that caused stockholders' equity to change during hte period, including those that caused retained earnings to change. |
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Term
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Definition
| an assumption that the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared for the business. |
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Term
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Definition
| the difference between the amounts of current assets and current liabilities |
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Term
| identify the sections of a classified balance sheet |
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Definition
| in a classified balance sheet,companies classify assets as current assets; long-term investments; property, plant and equipment; and intangibles. They classify liabilities as either current or long-term. A stockholders' equity section shows common stock and retained earnings. |
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Term
| identify and compute ratios for analyzing a company's profitability |
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Definition
| profitability ratios, such as earnings per share (EPS), measure aspect of the operating success of a company for a give period of time. |
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Term
| explain the relationship between a retained earnings statement and a statement of stockholders' equity. |
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Definition
| the retained earnings statement presents the factors that changed the retained earnings balance during the period. A statement of stockholders' equity presents the factors that hanged stockholders' equity during the period, including those that changed retained earnings. Thus, a statement of stockholders' equity is more inclusive. |
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Term
| identify and compute ratios for analyzing a company's liquidity and solvency using a balance sheet. |
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Definition
| Liquidity ratios, such as the current ratio, measure the short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash. Solvency ratios, such as the debt to total assets ratio, measure the ability of an enterprise to survive over a long period. |
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Term
| use statement of cash flows to evaluate solvency |
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Definition
| free cash flow indicates a company's ability to generate cash from operations that is sufficient to pay debts, acquire assets, and distribute dividends |
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Term
| explain the meaning of generally accepted accounting principles. |
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Definition
| generally accepted accounting principles are a set of rules and practices recognized as a general guide for financial reporting purposes. The basic objective of financial reporting is to provide information that is useful for decision making. |
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Term
| discuss financial reporting concepts. |
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Definition
to be judged useful, information should have relevance, reliability, comparability, and consistency
the monetary unit assumption requires that companies include int he accounting recoresd only transaction data that can be expressed in terms of money.
The economic entity assumption sates that economic events can be identified with a particular unit of accountability.
The time period assumption states that the economic life of a business can be divided into artifical time periods and that meaningful accounting reports can be prepared for each period.
The going concern assumption states that the enterprise will continue in operation long enough to carry out its existing objectives and commitments
The cost principle states that companies should record assets at their cost. The full disclosure principle dictates that companies disclose circumstances and events that metter to financial statement users.
The major constraints are materiality and conservatism. |
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Term
| categories under "assets" on a classified balance sheet (4) |
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Definition
1) current assets
a) cash
b) short-term investments
c) accounts receivable
d) notes receivable
e) inventories
f) supplies
g) prepaid insurance
2) long-term assets
a) investment in stock
b) investment in real-estate
c) long-term investments in marketable securites
3) property, plant, and equipment
4) intangible assets
a) goodwill
b) film library
c) customer lists
d) cable television franchises
e) sports franchises
f) brands, trademarks, and other intangible assets |
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Term
| categories under "liabilities" on classified balance sheet (3) |
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Definition
1) current liabilities
a) notes payable
b) accounts payable
c) salaries payable
d) unearned revenue
e) interest payable
f) current maturities of long-term debt
g)accrued compensations payable
h) taxes payable
2) long-term liabilities
a) mortgage payable
b) long-term notes payable
3) stockholders' equity |
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Term
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Definition
| covering two years for the same company |
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Term
| industry-average comparisons |
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Definition
| based on average ratios for particular industries |
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Term
| inter-company comparisons |
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Definition
| based on comparisons with a competitor in the same industry |
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