question

Most of the financial information about an organization is based on information generated from accounting records. The reports and financial statements prepared by accountants... (1pt)

answer

provide information that can be used by decision-makers both inside and outside the organization

question

Cole is an accountant with a large public company. As an account, his responsibilities include... (2pts)

answer

summarizing and interpreting financial information needed by his firm's managers

question

An accounting system would not be used for...

answer

determining the most profitable target market segment for the company's new product line

question

One of the main duties of bookkeepers is to...

answer

record business transactions in journals

question

The purpose of a trial balance is to...

answer

ensure that the figures in the account ledgers are correct and balanced

question

The three key financial statements prepared by accountants are the balance sheet, the statement of cash flows, and the ....

answer

income statement

question

Tyler works as an accountant for a mid-sized retail store. He has just completed a successful trial balance. Tyler's next task is likely to be...

answer

preparing the store's balance sheet and other major financial statements

question

Accountant Alan Winger has just completed the balance sheet, income statement, and statement of cash flows for his company. The next step in the accounting cycle involves...

answer

analyzing the firm's financial statements to evaluate the financial condition of the firm.

question

Collins Enterprises is building a new manufacturing facility and has taken out a 30-year mortgage with Frontier Financial in the amount of $350,000 to finance his project. This mortgage would be shown as a(n) ______ _______ on the company's balance sheet.

answer

long-term liability

question

The financial statement that summarizes the revenue and expenses and resulting net income (or loss) over a specified time period is called the .....

answer

income statement

question

Not paying dividends to your shareholders; These undistributed profits are referred to as...

answer

retained earnings

question

According to the fundamental equation, the value of assets the firm owns equals the amount of money the firm owes to others plus .....

answer

owners' equity

question

The balance sheet shows liabilities of $5,000,000 and owners' equity of $5,237,000. According the the fundamental equation....

answer

assets equal $10,237,000

question

The statement of cash flows reports cash receipts and cash disbursements that is not related to,,,,

answer

cash generated thru the cost of goods sold (gross margin)

question

The part of the business that belongs entirely to the creditors is called:

answer

liabilities

question

Managers need information to make decisions. Which type of information arranges this data in such a way?

answer

managerial accounting

question

It is mandated that a public firm fully disclose its financial data once a year in their:

answer

annual report

question

Although a firm may list a large dollar value of assets, how would a bank evaluate if the company was able to repay a loan?

answer

by analyzing the firm's balance sheet and income statement

question

Measurements of a firm's liquidity, debt, and assets could be created in a(n)...

answer

current ratio

question

If Tom and Tony each had a corporation, then what set of rules would prevent them from creating unique formats of information in their financial statements?

answer

GAAP

question

The principles that accountants must follow in order to assure that a firm's accounting information is accurate are abbreviated as:

answer

GAAP

question

What are some benefits of using computers of accounting purposes? (3pts)

answer

information can be posted from journals instantaneously; computers can handle large amounts of financial information; software can help if no strong accounting support is available;

question

Term is to phrase: (1) Accounting (4pts): (2) Bookkeeping: (3) Accounting cycle: (4) Trial balance:

answer

(1) classifying, summarizing, interpreting, and reporting (2) recording (3) series of six steps (4) summary of data in ledgers

question

What are 2 advantages of the using of computers to maintain and compile accounting information? (2pts)

answer

speed; handle large amounts of data

question

6 steps in the accounting cycle beginning to end:

answer

(1) analyze source documents (2) record transactions in journals (3) transfer journal entries to a ledger (4) take a trial balance (5) prepare financial statements (6) analyze financial statements

question

The _________ shows all of a firm's revenues, costs, and whether it made a profit or loss during a specific period.

answer

income statement

question

What term describes the cost of merchandise the firm sells?

answer

cost of goods sold

question

A company's ________ summarize all of the transactions that have occurred over a particular period or point in time

answer

financial statements

question

If financial management is the heartbeat of competitive businesses, what keeps that heartbeat stable?

answer

accounting information

question

The statement of cash flows reports cash receipts and disbursements related to ______, investments, and financing

answer

operations

question

The major accounts on the balance sheet include: (3 pts)

answer

liabilities; owners' equity; assets

question

Rent, salaries, supplies, utilities, and insurance are examples of ______ expenses that are general expenses

answer

operating

question

Examples of profitability ratios include: (3pts)

answer

return on sales; basic earnings per share; return on equity

question

A current bill that a company owes to others that is the result of buying merchandise on credit is called:

answer

accounts payable

question

In order to be a certified management accountant a person must: (3pts)

answer

be certified by the Institute of Certified Management Accountants; pass a qualifying exam; meet educational requirement;

question

What is the meaning of bonds payable?

answer

long-term liabilities that represent money lent to the firm that must be paid back

question

Return on sales is: (equation)

answer

net income divided by net sales

question

Retained earnings

answer

accumulated earnings not paid out to stockholders

question

Businesses that are not incorporated identify the investment of the sole proprietors thru the ____ account

answer

capital

question

A certified management accountant (CMA) must be certified by the Institute of Certified Management Accountants and provides information to managers _______ the organization

answer

inside

question

The key working areas of accounting include: (5pts)

answer

tax accounting; auditing; managerial accounting; government and not-for-profit accounting; financial accounting

question

Which ration is the cost of goods divided by the average inventory?

answer

the inventory turnover ratio

question

the ratios that measure the effectiveness of a firm's management in using the assets that are available are called: (2pts)

answer

activity ratios; performance ratios

question

Reviewing and evaluating records used to prepare a company's financial statements is referred to as:

answer

auditing

question

What type of ratios measure how effectively a firm is using its various resources to achieve profits?

answer

profitability (performance) ratios

question

A tax accountant has specialized and learned tax _______ and is responsible for preparing tax returns.

answer

law

question

A certified management accountant:

answer

must pass a qualifying exam and be certified

question

Managerial accounting is concerned with: (3pts)

answer

controlling; measuring production costs; preparing budgets

question

An acid test ratio between _#_ and _#_ is usually considered satisfactory but could also be a sign of some cash flow problems.

answer

0.5; 1.0

question

The primary users of government and not-for-profit accounting information are: (3pts)

answer

legislative bodies; citizens; special interest groups

question

What are two examples of inputs to the accounting system?

answer

shipping documents; sales documents

question

a company's ______ statements summarize all of the transactions that have occurred over a particular period or point in time.

answer

financial

question

What are some things that would be shown on an income statement? (4pts)

answer

operating expenses; revenue; net income; cost of goods sold

question

The area of accounting that provides information to managers inside the organization to assist them in decision making is called:

answer

managerial accounting

question

Financial data from transaction documents are first recorded in a(n) _____. The data are then transferred into a(n) _____, so managers can find all the information about a single account in one place.

answer

journal; ledger

question

_____ payable can be either short-term or long-term liabilities that a business promises to repay by a certain date.

answer

notes payable

question

Government and not-for-profit accounting involves working for organizations whose purpose is to serve: (2pts)

answer

ratepayers; taxpayers

question

A company's net sales minus cost of goods sold is called:

answer

gross profit

question

The major activities of a firm shown on the statement of cash flows include: (3pts)

answer

operations; investments; financing

question

Which financial statement shows the firm's profit after costs, expenses, and taxes?

answer

income statement

question

The bottom line is another name for:

answer

net income or loss

question

Common financial transactions include: (3pts)

answer

paying employees; acquiring insurance; buying and selling goods

question

______ are cash used in or provided by the firm's investment activities.

answer

investments

question

_____ income after taxes is the last line on the income statement

answer

net

question

Accounting reports and ____ ____ are critical to understanding the health of a business

answer

financial statements

question

The formula for the costs of goods sold:

answer

purchase price + freight charges + storage costs

question

On the statement of cash flows financing activities would include: (3pts)

answer

paying past debt; taking on new debt; paying dividends

question

Examples of profitability ratios include: (3pts)

answer

return on equity; basic earnings per share; return on sales

question

Buying and selling goods and services, acquiring insurance, paying employees, and using supplies are all examples of:

answer

financial transactions

question

What are the main types of financial ratios used in ratio analysis? (4pts)

answer

debt; activity ratios; profitability ratios; liquidity ratios

question

The area of accounting that provides financial information and analysis to managers within the organization to assist them in decision making is called ____ accounting

answer

managerial

question

_____ accountants are involved in generating financial information and analysis for the company's creditors, lenders, customers, suppliers, and government agencies, and the general public

answer

financial

question

An evaluation and unbiased opinion of the accuracy of a firm's financial statements can be obtained after a _____ ____

answer

independent

question

an important tool for investors used in determining the value of a stock is the amount of net income that belongs to each share of common stock. this is called:

answer

earnings per share (EPS)

question

The four key types of ratios that investors monitor are....

answer

liquidity ratios; profitability ratios; leverage ratios; activity ratios

question

The measure of how quickly an asset can be converted to cash is referred to as its...

answer

liquidity

question

Leverage ratios are used to understand how much the company relies on ______ to fund its operations

answer

debt

question

Analyzing a company's _____ ratio is one way in which an investor can tell if the company can pay off its short-term debts if there is a drop in sales revenue

answer

acid-test ratio

question

accounting

answer

the recording, classifying, summarizing and interpreting of financial events and transactions to provide management and other interested parties the information they need to make good decisions

question

what are the buying and selling goods and services, acquiring insurance, paying employees, and using supplies?

answer

financial transactions

question

What are the purposes of accounting? (2pts + 9 such as pts)

answer

to help managers make well-informed decisions; report financial information about the firm to interested stakeholders, such as employees, owners, creditors, suppliers, unions, community activists, investors, and the government (for tax purposes)

question

accounting system

answer

the method used to record and summarize accounting data into reports;

question

the inputs to an accounting system include.... (2 pts)

answer

sales documents; other documents

question

The data are... (3pts)

answer

recorded, classified, and summarized

question

Then, they're put into ____ ____ ____ such as the ______, _______, & _______.

answer

summary financial statements; income statement; balance sheet; statement of cash flows

question

#1 (accounting system) Inputs: Accounting documents (name a few of the 7 examples)

answer

Sales documents, purchasing documents, shipping documents, payroll documents, payroll records, bank records, travel records, entertainment records

question

#2 (accounting system) Processing:

answer

1. Entries are made into journals: recording 2. The effects of these journal entries are transferred or posted into ledgers: classifying 3. All accounts are summarized

question

#3 (accounting system) Outputs: Financial statements (5pts)

answer

Balance sheet, income sheet, statement of cash flows, other reports, (e.g. annual reports)

question

what is the language of business?

answer

accounting

question

The five key working areas of accounting:

answer

managerial accounting; financial accounting; auditing accounting; tax accounting; government and not-for-profit accounting

question

managerial accounting

answer

accounting used to provide information and analyses to managers inside the organization to assist them in decision making

question

what is managerial account concerned with? 3pts

answer

measuring and reporting costs of production, marketing, and other functions; preparing budgets (#planning); checking whether or not units are staying within their budgets (#controlling); and designing strategies to minimize taxes.

question

What is a CMA? 2pts

answer

a certified management accountant; a professional accountant who has met certain educational and experience requirements, passed a qualifying exam, and been certified by the Institute of Certified Management Accountants.

question

Why is being a CMA or managerial accounting important? 3pts

answer

b/c of growing emphasis on global competition, outsourcing, and organizational cost-cutting

question

financial accounting

answer

#accounting information and analyses prepared for people outside the organizaiton

question

How does it contrast managerial accounting?

answer

the financial information and analyses it generates are for people primarily outside the organization

question

Where does the information that financial accountants generate go to? (name a few of the 10 examples)

answer

not only company owners, managers, and employees, but also to creditors and lenders, employee unions, customers, suppliers, government agencies, and the general public

question

Questions external users ask like ¨is the organization profitable?¨ or ¨how much debt is owed is answered where?

answer

in the annual report

question

annual report

answer

a yearly statement of the financial condition, progress, and expectations of an organization - condition, progress, expectation; yearly

question

Why is there more in an annual report now than ever?

answer

stakeholders demand it

question

CPA 2pts

answer

certified public accountant; an accountant who passes a series of examinations established by the American Institute of Certified Public Accountants (#AICPA)

question

What do CPAs find careers doing? 3pts

answer

being a public accountant or private accountant or fill other financial position

question

FASB

answer

Financial Accounting Standards Board; the defines the generally accepted #accounting principles;

question

GAAP

answer

generally accepted accounting principles that accountants must follow;

question

What caused Sarbanes-Oxley-Act (#Sarbox) to pass?

answer

Scrutiny (close surveillance) in the #accounting industry being intensified leads Congress to pass this

question

What does the #Sarbanes-Oxley-Act (#Sarbox) do?

answer

created new govt reporting standards for publicly traded companies.

question

AICPA 2pt

answer

American Institute of Certified Public Accountants (#AICPA); established examinations for potential CPAs

question

#PCAOB aka #Public-Company-Accounting-Oversight-Board 2pt

answer

charged with overseeing AICPA; created by congress

question

Major provisions of Sarbox 6pt

answer

Prohibits #accounting firms from providing certain non-auditing work (such as consulting services) to companies they audit Strengthens the protection for whistle-blowers who report wrongful actions of company officers; Requires company CEOs and CFOs to certify the accuracy of financial reports and imparts strict penalties for any violation of securities reporting (e.g. earnings misstatements); Prohibits corporate loans to directors and executives of the company; Establishes the five-member #Public-Company-Accounting-Oversight-Board (#PCAOB) under the #Securities-and-Exchange-Commission (#SEC) to oversee the #accounting industry; Stipulates that altering or destroying key audit documents will result in felony charges and significant criminal penalties

question

the 2008 financial crisis lead to the passing of what two acts?

answer

#Dodd-Frank-Wall-Sreet-Act & #Consumer-Protection-Act

question

#Dodd-Frank-Wall-Sreet-Act

answer

increased financial regulation affecting accounting by increasing the power of #PCAOB (#Public-Company-Accounting-Oversight-Board) to oversee auditotrs of dealers in securities markets.

question

auditing

answer

the job of reviewing and evaluating the information used to prepare a company's financial statement

question

private accountants often perform ___ audits while public accountants also conduct _____ audits

answer

internal; independent

question

what guarantees that the organization is carrying out proper #accounting procedures and financial reporting?

answer

private accountants

question

what is a public accountant?

answer

an accountant who provides accounting services to individuals or businesses on a fee basis

question

accounting scandals make people question what?

answer

accounting firms doing both auditing and consulting

question

True or false: the govt stepped in and put in place new rules about #auditing and #consulting to ensure the integrity of the #auditing process. 2pts

answer

true... Sarbanes Oxley Act (Sarbox)

question

what is an auditors job?

answer

not only examine the financial health of an organization but also its operational efficiencies and effectiveness.

question

Certified-internal-auditor (CIA) 2pts

answer

an accountant who has a bachelor's degree and two years of experience in #internal-auditing, and who has passed an exam administered by the #Institute-of-Internal-Auditors

question

What is the job of an auditor? 3pts

answer

auditors review and evaluate the standards used to prepare a company's financial statements. An independent audit is conducted by a public accountant and is an evaluation and unbiased opinion about the accuracy of a company's financial statements

question

Six steps of the accounting cycle & identify whether it is accounting or bookkeeping

answer

1. Analyze source documents (BK) 2. Record transactions in journals (BK) 3. transfer journal entries to ledger (BK) 4. take a trial balance (BK) 5. prepare financial statements (A) 6. Analyze financial statements (A)

question

What is the difference between bookkeeping and accounting and accounting? 6pts

answer

Bookkeeping is part of accounting and includes the systematic recording of data. Accounting include classifying, summarizing, interpreting, and reporting data to management.

question

What are journals and ledgers? 4pts

answer

Journals are the first place bookkeepers record transactions. Bookkeepers then summarize the journal entries by posting them to ledgers. Ledgers are specialized accounting books that arrange the transactions by homogeneous [Uniform in structure or composition throughout] groups (accounts)

question

How do computers help accountants? 7pts

answer

Computers can record and analyze data and provide financial reports. Software can continuously analyze and test accounting systems to be sure they are functioning correctly. Computers can help decision making by providing appropriate information, but they cannot themselves make good financial decisions. Accounting applications and creativity are still human functions.

question

What is a balance sheet?

answer

a balance sheet reports the financial position of a firm on a particular day. The fundamental accounting equation used to prepare the balance sheet is Assets = Liabilities + Owners' equity

question

What are the major accounts of the balance sheet? (3 terms + a brief definition + equation... 7pts)

answer

Assets are economic resources owned by the firm, such as building and machinery. Liabilities are amounts the firm owes to creditors, bondholders, and others. Owners' equity is the value of everything the firm owns -- its assets minus any liabilities; thus, Owners' equity = Assets - liabilities

question

What is an income statement? 3pts; What are the formulas used to prepare the income statement?

answer

an income statement reports revenues, costs, and expenses for a specific period of time; revenue - cost of goods = gross margin gross margin - operating expenses = net income before taxes net income before taxes - taxes = net income (or net loss)

question

What is a statement of cash flows? 7pts

answer

Cash flow is the difference between cash receipts (money coming in) and cash disbursements (money going out). The statement of cash flows reports cash receipts and disbursements related to the firm's major activities: operations, investments, and financing.

question

What are the four key categories of ratios?

answer

the four key categories of ratios are liquidity ratios, leverage (debt) ratios, profitability (performance) ratios, and activity ratios

question

What is the major value of ratio analysis to the firm?

answer

ratio analysis provides the firm with information about its financial position in key areas for comparison to other firms in its industry and its own past performance.

question

tax accountant

answer

an accountant trained in tax law and responsible for preparing tax returns or developing tax strategies

question

Why is the job of being a tax accountant always challenging?

answer

tax policies are always changing

question

#Government-and-not-for-profit-accounting

answer

#accounting-system for organizations whose purpose is not generating a profit but serving ratepayers, taxpayers, and others according to a duly approved budget

question

Government and not for profit accounting is an accounting system ______ by federal, state, and local governments

answer

required

question

Who sets the government accounting standards?

answer

Governmental Accounting Standards Board (GASB)

question

Why do not-for-profit accountants need to hire accountants?

answer

to show contributors how their money is spent

question

accounting cycle

answer

a six-step procedure that results in the preparation and analysis of the major financial statements.

question

the accounting cycle relies on the work of whom? 2pts

answer

bookkeeper; accountant

question

bookkeeping

answer

the recording of business transactions, is a basic part of financial reporting

question

How does accounting differ from bookkeeping? 7pts

answer

classifying and summarizing financial data provided by bookkeepers, and then interpreting the data and reporting the information to management. Also suggesting strategies for imporving the firm's financial condition and prepare financial analyses and income tax returns

question

How does bookkeeping word or what is the step process?

answer

First: divide all the firm's transactions into meaningful categories such as sales documents, purchasing receipts and shipping documents, being very careful to keep the information organized and manageable Then: record financial data from the orginal transaction documents into a record book or computer program called a #journal

question

journal

answer

the record book or computer program where #accounting data are first entered; a days transactions

question

the practice of writing every business transaction into two places

answer

#double-entry-bookkeeping

question

#double-entry-bookkeeping requires entries where? 2pts

answer

in the journal and the ledger

question

ledger

answer

a specialized accounting book or computer program in which information from accounting journals is accumulated into specific categories and posted so that managers can find all the information about one account in the same place

question

trial balance

answer

step in the #accounting-cycle; a summary of all the financial data in the account #ledger s that ensures the figures are correct and balanced

question

financial statement

answer

a summary of all the transactions that have occurred over a particular period

question

Why are the IRS, stockholders, banks, etc very interested in the financial statement?

answer

it indicated the companys' health

question

The key financial statements of a business are: 3pts

answer

balance sheet; income statement; statement of cash flows

question

balance sheet 2pts

answer

reports the firm's financial condition on a specific date & details what the company owns and owes on a certain day

question

income-statement 2pts

answer

summarized revenues, cost of goods, and expenses (including taxes) for a specific period and highlights the total profit or loss the firm experienced during that period & shows the revenue a firm earned selling its products compared to its selling costs (profit or loss) over a specific period of time

question

statement of cash flows

answer

provides a summary of money coming into and going out of the firm & It tracks a company's cash receipts and cash payments highlights the difference between cash coming ing and cash going out of a business

question

What's the fundamental accounting equation?

answer

Assets = Liabilities + Owners' equity

question

What does Assets = Liabilities + Owners' equity mean?

answer

Your assets are now equal to what you owe plus what you own

question

In accounting, the fundamental accounting equation must always be _____

answer

balanced/equal

question

fundamental-accounting-equation

answer

Assets = Liabilities + Owners' equity'this is the basis for the #balance-sheet

question

balance sheet 4pts

answer

financial statement that reports a firm's financial condition at a specific time and is composed of three major accounts: assets, liabilities, and owners' equity

question

How do assets, liabilities, and equity pertain to a balance sheet or how are they expressed on a balance sheet? 7-14pts

answer

1. Current assets items that can be converted to cash within one year 2. Fixed assets items such as land, buildings, and equipment that are relatively permanent 3. Intangible assets items of value such as patents and copyrights that don't have a physical form 4. Current liabilities payments that are due in one year or less 5. Long-term liabilities payments not due for one year or longer 6. Owner's equity the value of what stockholders own in a firm (aka stockholder's equity)

question

assets are = to or balanced with the liabilities and owners' or _______ equity

answer

stockholders'

question

(on a balance sheet) - assets is.... liabilities is.... and equity is....

answer

assets = everything you own; liabilities = money owed; equity = subtracting assets with liabilities.

question

Balance sheets follow the accounting principles/guidelines of ...

answer

GAAP

question

assets

answer

economic resources (things of values) owned by a firm, including goodwill

question

Assets includes _____

answer

goodwill

question

goodwill

answer

represents the value attached to factors such as reputation, location, and superior products

question

How do goodwill and balance sheets relate?

answer

Goodwill is included when a firm acquires assets

question

liquidity

answer

the ease with which an asset can be converted into cash

question

Speeder conversion of cash means _______ liquidity

answer

higher

question

account recieveable

answer

is an amount of money owed to the firm that expects to receive within one year

question

accounts receivable are considered a _____ _____ b/c they are easily converted

answer

liquid asset

question

Three categories of assets: 3-6pts

answer

1, #current-assets - #term items that can or will be converted into cash within one year. include cash, accounts receivable, and inventory 2. #fixed-assets - #term long-term, relatively permanent e.g. land, building, equipment. (on a #balance-sheet they're referred to as property, plant, and equipment) 3. #intangible-assets - #term long0term, no physical form but have value. Patents, trademarks, copryrights, and goodwill

question

liabilities

answer

what the business owes to others (debts)

question

current liabilities

answer

debts due in one year or less

question

long-term liabilties

answer

debts not due for a year or more

question

Common liability accounts recorded on a #balance-sheet : 3-6pts

answer

1. #accounts-payable (current liabilities or bills the company owes to others for merchandise or services purchased on credit but not yet paid for) 2. #notes-payable (short-term or long-term liabilities that a business promises to repay by a certain date) 3. #bonds-payable (long-term liabilities that represent money lent to the firm that must be paid back)

question

Term for - not paid for yet

answer

accounts payable

question

notes payable

answer

short-term or long-term liabilities that a business promises to repay by a certain date

question

bonds payable

answer

long-term liabilities that represent money lent to the firm that must be paid back

question

equity =

answer

assets (the value of things you own) - liabilities (the amount of money you owe to others)

question

stockholders' equity or shareholders' equity

answer

the value of what stockholders own in a firm (minus liabilities)

question

stockholders' equity or shareholders' equity is also known as

answer

owners-equity

question

owners equity 2pts

answer

the amount of the business that belongs to the owners minus any liabilities owed by the business; aka stockholders' equity

question

formula for owners' equity

answer

assets - liabilities = owners' equity

question

Term for - what owners' equity is in firms where sole proprietors and partners it means the value of everything owned by the business minus any liabilities of the owner(s), such as bank loans

answer

capital account

question

The #owners-equity account records...

answer

the owners' claims to funds they have invested in the firm (such as stock) and retained earnings

question

Term for - the accumulated earnings from a firm's profitable operations that were reinvested in the business and not paid out to stockholders in dividends

answer

retained earnings

question

income statement 2pts

answer

the financial statement that shows a firm's profit after costs, expenses, and taxes; it summarizes all of the resources that have come into the firm (revenue), all the resources that have left the firm (expenses), and the resulting net income or net loss.

question

net income or net loss

answer

revenue left over after all costs and expenses including taxes are paid.

question

#income-statement reports ____ ____ over a period of time.

answer

financial operations

question

#income-statement determines...

answer

if the company is profiting or losing

question

What does an income statement include? (5-10pts)

answer

1. Revenue: value of what's received from goods sold, services rendered, and other financial sources 2. Cost of goods sold: cost of merchandise sold or cost of raw materials or parts used for producing itmes for resale 3. Gross profit: how much the firm earned by buying or selling merchandise 4. Operating expenses: cost incurred in operating a business 5. Net income after taxes: profit or loss over a specific period after subtracted all costs and expenses, including taxes

question

Although ___ is a part of revenue, one must not confuse them.

answer

sales

question

____ refers to the total of all sales the firm completed

answer

gross sales

question

net sales

answer

gross sales minus returns, discounts, and allowances

question

cost of goods sold

answer

a measure of the cost of merchandise sold or cost of raw materials and supplies used for producing items for resale

question

cost of goods sold is also known as .......

answer

cost of goods manufactured

question

Costs of goods sold compares how much a business ______ by selling merchandise and how much it _____ to make or buy the merchandise

answer

earned; spent

question

The cost of goods includes: 2pts

answer

the purchase price + - any freight charges paid to transport goods - any costs associated with storing the goods

question

it doesn't matter when a firm places a particular item in its inventory, but it does matter how an accountant _____ the cost of the item when the firm sells it

answer

records

question

gross profit or gross margin 2pts

answer

how much a firm earned by buying (or making) and selling merchandise; #cost-of-goods-sold - #net-sales

question

If there is no #cost-of-goods-sold then _____ could = #gross-profit (gross margin)

answer

net sales

question

operating expenses

answer

costs involved in operating a business, such as rent, utilities, and salaries

question

Other #operating-expenses that appear on an #income-statement are more complex e.g. _______

answer

depreciation

question

___ is the systematic write-off of the cost of a tangible asset over its estimated useful life

answer

depreciation

question

#operating-expenses can be classified as ___ or ___ expenses

answer

selling or general

question

selling expenses

answer

are related to the marketing and distribution of the firm's goods or services, such as advertising, salespeople's salaries, and supplies

question

___ are administrative expenses of the firm such as office salaries, depreciation, insurance, and rent

answer

general expenses

question

After deducting all expenses, the firm's _____ can be determined

answer

#net-income-before-taxes

question

#net-income-before-taxes is also known as (2pts)

answer

net earnings or net profit

question

After distributing the taxes according to plan or allocating for taxes, the ______ is uncovered

answer

#bottom-line

question

bottom line

answer

the #net-income or #net-loss the firm incurred from revenue minus sales returns, costs, expenses, and taxes over a period of time.

question

¨Did the business earn or lose money in the specific reporting period?¨ is answered where?

answer

at the bottom line

question

statement of cash flows

answer

financial statement that reports cash receipts and disbursements related to a firm's three major activities: operations, investments, and financing.

question

Three major activities of a firm: 3-6pts

answer

#operations cash transactions associated with running the business #investments cash used in or provided by the firm's investment activities #financing cash raising by taking on new debt, or equity capital or cash used to pay business expenses, past debts, or company dividends

question

statement of cash flows includes: 3pts

answer

1. Cash receipts from sales, commissions, fees, interest, and dividends. Cash payments for salaries, inventories, operating expenses , interest, and taxes. 2. Includes cash flows that are generated thru a company's purchase or sale long-term operational assets, investments in other companies, and its lending activities. 3. Cash inflows and outflows associated with the company's own equity transactions or its borrowing activities

question

Can a business increase sales and profits and still suffer cash flow problems?

answer

yes

question

cash flow

answer

the difference between cash coming in and cash going out of a business

question

Summarized, how do cash flow problems start? 2pts

answer

buying goods on credits and the money to pay the credit back is coming on a later date

question

_____ measure how effectively a firm's managers are using its various resources to to achieve profits

answer

profitability (performance) ratios

question

Three of the more important ratios:

answer

#earnings-per-share (#EPS) #return-on-sales #return-on-equity

question

EPS (earnings per share)

answer

a revealing ratio bc earnings help stimulate the firm's growth and provide for stockholders' dividends.

question

#basic-earnings-per-share-ratios (#basic-EPS)

answer

helps determine the amount of profit a company earned for each share of outstanding common stock

question

_____ measures the amount of profit earned for each share of outstanding common stock, but also considers stock options, warrants, preferred stock, and convertible debt securities the firm can convert into common stock.

answer

#diluted-earnings-per-share-ratio (#diluted-EPS)

question

basic EPS =

answer

#net-income-after-taxes / number of common stock shares outstanding

question

return on sales

answer

tells us whether the firm is doing as well as its competitors in generating income from sales

question

return on sales =

answer

#return-on-sales = #net-income / #net-sales

question

The _____ the risk of failure or loss in an industry, the higher the return investors expect on their investment; they expect to be well compensated for shouldering such odds

answer

higher;

question

return on equity

answer

indirectly measures risk by telling us how much a firm earned for each dollar invested by its owners.

question

return on equity =

answer

#net-income-after-taxes / total #owners-equity

question

anything over __% return on equity is a reasonable return

answer

15%

question

#profitability-ratios relate to ___ which is vital to the growth of a company. Thus #profitability-ratios are such closely watched measurements of company growth and management performance

answer

profit

question

Converting the firm's inventory to profits is a key _____ of management

answer

function

question

activity ratios

answer

tell us how effectively management is turning over inventory

question

________________ measures the speed with which inventory moves thru the firm and gets converted into sales

answer

inventory turnover ratio

question

The more efficiently a firm sells or turns over its inventory, the ___ its revenue

answer

higher

question

#inventory-turnover-ratio =

answer

#cost-of-goods-sold / average inventory

question

#inventory-turnover-ratio

answer

measures the speed with which inventory moves thru the firm and gets converted into sales

question

(Lower/higher) than average #inventory-turnover-ratio often indicates obsolete merchandise or poor buying practices

answer

lower

question

____ accounts #assets cash, #accounts-receivable, inventory, investments, equipment, land, buildings, vehicles, goodwill #liabilities #accounts-payable, #notes-payable, #bonds-payable, #taxes-payable #owners-equity capital stock, #retained-earnings, common stock, treasury stock

answer

balance sheet

question

income statement accounts (3-6pts)

answer

#revenues sales revenue, rental revenue, commissions revenue, royalty revenue #cost-of-goods-sold cost of buying goods, cost of storing goods #expenses wages, rent, repaints, taxes, advertising, supplies, licenses, interest, storage, utilities (full list p485)

question

#financial-analysis begins where the #accounting #financial-statements _____

answer

ends

question

_____ involves the review and evaluation of the records that are used to prepare the organization's financial statements.

answer

auditing

question

_____ is the accounting practice of recording each transaction in two places in the accounting journal.

answer

double-entry bookkeeping

question

The Balance Sheet, the Statement of Cashflows, and the ___ are three key financial statements.

answer

Income Statement

question

Debts owed by a business are called _____

answer

liabilities

question

____ refers to how quickly an asset can be converted to cash

answer

liquidity

Understanding Business Chapter 17: Understanding Accounting and Business Information – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards