Exam 2 ratios Flashcards
what does net margin show
shows how much of each dollar in revenue translates into profit
What does return on investments ratio say about company
measures the benefit an investor receives in relation to cost of investment
what does return on equity ratio show
shows how efficiently a company can generate profit from shareholders’ equity
what does Accs receivable turnover ratio say about a business
How fast a company collects its receivables
What does INV turnover ratio tell about business
Shows how well a business manages its inventory
which ones are the same
FOB shipping point
FOB destination
Transport in
Transport out
FOB destination (seller respon)
Transport out
Transport in
FOB shipping point (buyer respon)
What goes into inventory outflow
Net cash paid to purchase inventory and transport in expense
is transport in or transport out a period cost
transport out
Where is transport in expense added to
Cost of inventory and production cost
How would you record this: The merchandise was delivered FOB shipping point. Freight costs of $570 were paid in cash.
decrease cash because you paid for it in cash and add it to the cost of inventory
When t=do you have a negative revenue
when you are receiving an account payable within the discount period and need to take the discounted amount out of the original revenue
how would this look on the income statement: Received merchandise returned from a customer. The merchandise originally cost $570 and was sold to the customer for $870 cash. The customer was paid $870 cash for the returned merchandise.
take (870) out of revenue to correct the amount of revenue earned
take (570) out of expenses to correct COGS
How to record a right off
take it out of A/R, add to allowance ONLY time you add to allowance
How to record an estimate
take out of allowance
take out of R/E
collecting a previously written off account
add to A/R take out of allowance
add to cash take out A/R
