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Statement of Cash Flow

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explains why cash changed during a fiscal period. Flows from operating, investing and financing activities are shown

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Paid In Captial

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amount invested in the entity by stockholder

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Accounts Recievable

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an asset representing a claim against another entity, usually arising fro selling goods and services

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Goodwill

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nonamoritzable intangible asset arising from the purchase of a business for more than the fair value of the net assets acquired

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Amortization

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process of spreading the cost of an intangible asset over its useful life

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Stockholders Equtiy

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ownership right of stockholders of the entity in the assets that remain after deducting the liabilities

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Retained Earnings

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cumulative net income that has not been distributed to the stockholders of a corporation as dividends

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Revenues

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in flows of cash or increases in other assets or the settlement of liabilities during a period, from delivering or producing goods

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Balance Sheet

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Financial statement that is listing of the entity's assets, liabilities, and stockholders equity Assets=Liabilities+Stockholders Equity

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Horizontal Model

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represents the balance sheet and income statement relationship Assets=Liabilities+Stockholders Equity+Revenues-Expenses

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Income Statement

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Summarizes the entity's revenues, expenses, gains, and losses for a time period

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Depreciation

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process of recognizing the cost of an asset that is used up over its useful life of the entity

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Dividend

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distribution of earnings to the stockholders of a corporation

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Financial Leverage

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the use of debt that causes a difference between ROI & ROE

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Earned Revenue

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Entity has completed the activities it must perform to be entitled to the revenue bemefits

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Realization Revenue

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product or service has been exchanged for cash, claims to cash or an asset that is convertible to a known amount of cash

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Current Assets

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cash & equivalents, short-term marketable securities, AR, Notes Receivable, Inventories, prepaid expenses

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Prepaid Expenses

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Expenses that have been paid in the current fiscal period but will no be subtracted from revenues until a subsequent fiscal period when benefits are received

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Cash Equivalents

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short-term, highly liquid investments that can readily be converted into cash with a minimal risk of price change due to interest rate movements.

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Consolidation Financial Statement

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statements resulting from the combination of parents and subsidiary company financial statements

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Dividend Payout Ratio

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ratio of the annual dividend per share of common stock to earnings per-share

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Outstanding Stock

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number of shares of a class of stock held by stockholders -under stockholders equity

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Alternative Names of Balance Sheet

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Statement of Operations Statement of Financial Position

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What term is used to describe where transactions are summarized and recorded?

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General ledger Journalizing and posting An illustration

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Differences in Stockholder Equity section of corporation and owners' equity of a proprietorship or partnership

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Corporation has several advantages over the sole proprietorship and the partnership form of business. 4 major advantages 1. Limited Liability 2. Ease in which owners can sell their ownership interest 3. Continuity 4. Ease in raising money Stockholders Equity has 3 main components of a corporations balance sheet. SE is to a corporation what owner's equity is to a sole proprietorship. Owners Corporation are called SE

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Formulas and Ratios that measure : Liquidity and Profitability

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Liquidity - Working Capital - Current Ratio - Acid Test Ratio Profitability - Return on Investment - Return on Equity - Price/Earnings Ratio - Dividend Payout Ratio - Dividend Yield Ratio

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Different ways a bond can be sold and describe them

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Measuring return with Yield---Yield is a figure that shows the return you get on a bond. The simplest version is calculated using : yield=coupon amount / price Yield to Maturity --- Most advanced yield calculation that shows the total return you will receive if you hold the bond to maturity --- it equals all the interest payments you will receive as well

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LIFO Cost Flow Assumption

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Income taxes will be lower Last in First Out

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FIFO Cost Flow Assumption

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Income taxes will be higher First in First Out

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When purchasing capital assets what type of expenditures can be capitalized

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- All lad acquisitions - All building/facilities acquisition and new construction - Capitalized interest incurred on new construction, rehabilitation or improvement projects in excess of $100,000

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What affect does the accrual of interest have on the horizontal analysis model?

answer

Horizontal analysis is comparing figures year to year...If an analyst wishes to see how sales revenue of a company has changed for one year to the next...Accrual accounting requires the use of many estimates...cost of goods sold grew more rapidly than selling expenses

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Why would a company use declare a stock split?

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Stock split is used primarily by companies hat have seen their prices increase substantially and although the number of outstanding shares increases and price per share decreases, the market capitalization does not change

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Why are significant accounting policies best described in the notes to the financial statements?

answer

Disclosures help users of financial statements understand how particular accounting principles were used in preparing the company's financial statements . Both for-profit and non-profit organization should disclose the details of their significant accounting policies that are important in determining the financial position or result operations of the organization

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The objectives of financial reporting for nonbusiness enterprises

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Focus on providing information for resource providers, rather than investors

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What monthly adjustment likely to be made to the financial records of a company has a note payable to the bank?

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Making the end-of-the period adjustment to record estimated collectible accounts

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Time frame associated with the balance sheet and income statement

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Balance Sheet= Point in time in the past Income Statement= Past Period of time

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Why is depreciation added back to net income in the statement of cash flows?

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Because we begin preparing the statement of cash flows using the net income figure taken from the income statement, we need to adjust the income figure so that it is not reduced by depreciation expenses

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What is the net book value of a depreciable asset?

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net book value is the value at which a company carries an asset on its balance sheet. It is equal to the cost of the asset minus accumulated depreciation

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What is a fiscal year?

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a year as reckoned for taxing or accounting purposes

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Trading and Available-for-Sale securities are reported on the balance sheet at what value?

answer

Stockholders Equity - not included on the income statement

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In the Balance Sheet what value is accounts receivable started at?

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Under Assets

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(Tax liability) What is normally the largest item with this account?

answer

increase in balance of deferred tax liability minus the increase in balance of deferred tax asset ?

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Order of liquidity of the current assets section of the Balance Sheet

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- Cash - Marketable Securities -Accounts Receivable -Inventories -Plant and Equipment -Building -Land

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Major difference between the indirect and direct method of a statement of cash flows

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Direct method will include the amounts for lines such as cash from customers paid to suppliers. Provides a reconciliation of net income to the cash provided by operating activities Indirect method will show net income followed by the adjustments needed to convert the total net income to the cash amount from operating activities

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What does a high P/E ratio mean?

answer

Means investors are anticipating higher growth in the future

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What does a high current ratio mean?

answer

If ratio is increasing it could indicate that the firm has too much inventory that will have to be written off, or to many old accounts receivable that may turn into bad debts

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