Accounting

Question 1

Managerial Accounting

Answer 1

Aims to provide financial information so managers can make decisions aligned with their business strategies

Question 2

Financial Accounting

Answer 2

Aims to provide financial statements, including measuring a company’s performance to assess its financial health

Question 3

Generally Accepted Accounting Principles (GAAP)

Answer 3

The standards followed by US accountants when preparing statements 

Question 4

Assets

Answer 4

Things of value owned by a firm 

Question 5

Liabilities (Debt)

Answer 5

What a firm owes to its creditors 

Question 6

Owner’s Equity (Net Worth)

Answer 6

The total amount of investment in the firm minus any liabilities 

Question 7

Accounting Equation

Answer 7

Assets – Liabilities = Owners’ Equity

Question 8

Balance Sheet

Answer 8

Summarizes a firm’s financial position at a specific point in time

Question 9

Current Assets

Answer 9

Part of the Balance Sheet

Can/will be converted into cash within a year

Cash, Securities, Accts Receivable, Notes Receivable, Inventory

Question 10

Fixed Assets

Answer 10

Part of the Balance Sheet

Long-term and used for more than a year 

Ex. Land, Buildings, Machinery, Furniture 

Question 11

Intangible Assets

Answer 11

Part of the Balance Sheet

Long-term assets w/ no physical existence

Ex. Patents, Copyrights, Trademarks 

Question 12

Current Liabilities

Answer 12

Part of the Balance Sheet

Claims due within a year of the balance sheet’s date 

Accts Payable, Notes Payable, Accrued Expenses, Income Taxes Payable, Current Portion of Long-Term Debt

Question 13

Long-term Liabilities

Answer 13

Part of Balance Sheet

Claims due more than a year after the balance sheet’s date

Question 14

What is included in owners’ equity?

Answer 14

Part of Balance Sheet

Money put into businesses by sole proprietors or partners are called capital

Corporation owners private capital by buying the firm’s common stock

Question 15

Retained Earnings

Answer 15

Part of Balance Sheet and owners’ equity

Retained Earnings: Amounts left over from profitable operations

RE = Total Profits – All Dividends paid to stockholders

Question 16

Revenue

Answer 16

Part of the Income Statement

$ amount of sales + income received from sources (interest, dividends, rent) 

Question 17

Expenses

Answer 17

Part of the Income Statement

The costs of generating revenues

Question 18

Net Profit/Loss

Answer 18

Part of the Income Statement

$ left after subtracting all expenses from revenues

Question 19

Cost of Goods Sold (CoGS)

Answer 19

Part of the Income Statement

Total expense of buying/producing the firm’s goods or services 

CoGS  = Total Cost of Goods for Sale – Cost of Inventory at end of period 

Question 20

Operating Expenses

Answer 20

Part of the Income Statement

Expenses of running a business that are not directly related to producing or buying its products

Question 21

Gross Sales

Answer 21

Part of the Income Statement

The total $ amount of a company’s sales

Question 22

Net Sales

Answer 22

Part of the Income Statement

Amount left after deducting sales discounts and returns & allowances

Question 23

Sales Discounts

Answer 23

Part of Net Sales

Price reductions given to customers that buy bills early

Question 24

Returns and Allowances

Answer 24

Part of Net Sales

$ amount of returned product because they were dissatisfied/was damaged

Question 25

Statement of Cash Flows

Answer 25

Summary of the money flowing into and out of a firm

Question 26

Operating Activities

Answer 26

Part of SoCF

Those related to production of the firm’s goods or services

Question 27

Investing Activities

Answer 27

Part of SoCF

Those related to the purchase and sale of fixed assets

Question 28

Financial Activities

Answer 28

Those related to debt and equity financing

Question 29

Ratio Analysis

Answer 29

Calculation and interpretation of financial ratios using data taken from the firm’s financial statements in order to assess its condition and performance

Question 30

Liquidity

Answer 30

Part of Ratio Analysis

Measure the firm’s ability to pay its short-term debts as they come due

Question 31

Current Ratio

Answer 31

Part of Liquidity

Ratio of total current assets to total current liabilities  

Question 32

Acid-Test (Quick) Ratio

Answer 32

Part of Liquidity

Current Ratio w/o inventory (b/c least liquid current asset) 

Question 33

Networking Capital

Answer 33

Part of Liquidity

Measures overall liquidity 

Question 34

Profitability

Answer 34

Part of Ratio Analysis

How well a firm uses its resources to generate profit & how efficient it’s managed

Question 35

Net Profit Margin

Answer 35

Part of Profitability

% of each sales dollar remaining after all expenses (including taxes) are deducted 

Question 36

Return on Equity (ROE)

Answer 36

Part of Profitability

Measures the return owners receive on investments in the firm 

Question 37

Earnings per Share (EPS)

Answer 37

Part of Profitability

Ratio of net profit to # of shares of outstanding common stock 

Question 38

Activity

Answer 38

Part of Ratio Analysis

Measure how well a firm uses its assets

Question 39

Inventory Turnover Ratio

Answer 39

Part of Activity

Measures how fast inventory moves through the firm and is turned into sales (ITR = CoGS/Average Inventory)

Question 40

Debt

Answer 40

Part of Ratio Analysis

Measure the degree of the firm’s use of borrowed funds (debt) to finance operations

Question 41

Debt-to-Equity Ratio

Answer 41

Measures the relationship btw. amount of debt financing (borrowing) and amount of equity financing (owners’ funds) 

Question 42

Pro-forma financial statements

Answer 42

Set of financial statements that predicts the expected future performance of a company