Accounting Ratios Midterm (other stuff too)

Question 1

Average Age Percentage

Answer 1

(Total Accum. Dep / Total PPE - Land) 100
To what extent the PPE has been depreciated

Question 2

Average Age

Answer 2

Total Accum. Dep / Dep Exp
How long a company has been using its PPE (how old it is)

Question 3

Fixed Asset Turnover

Answer 3

Rev / Average Net PPE
How much $ the company has been generating sales relative to its investments in PPE

Question 4

A/P Turnover

Answer 4

(COGS - Begin. Inv + EI) / Average A/P
How long it takes a company to pay suppliers
High # : paying back fast
Low # : paying back slowly

Question 5

Average Payment Period

Answer 5

365 / A/P Turnover Ratio
How many days it takes a company to pay back credits

Question 6

Leverage

Answer 6

Ac ompanys use of debt to generate returns for shareholders

Question 7

Leverage ratios

Answer 7

To assess a company’s capital structure and the risk associated with the use of debt

Question 8

Debt to Equity

Answer 8

Total Liabilities - Cash / SE
Measures the % of debt relative to each dollar is equity
(how much debt are you relying on compared to equity)

Question 9

Net Debt as a % of Total Capitalization

Answer 9

(Total Liabilities - Cash) / (Total Liabilities - Cash) + SE
Measures what % of debt represents the company’s total financing

Question 10

Interest Coverage

Answer 10

EBITDA / Int Exp
Measures company’s ability to meet its Interest obligation through its earning
(# of times EBITDA can cover its Interest Exp in a year)

Question 11

Loyalty Provision

Answer 11

How much was actually redeemed
(# of points OVER every $ spent) x revenue generated x estimate of points redeemed

Question 12

Gift Card Breakage

Answer 12

Split by % redeemed and % not redeemed

Question 13

Journalize Breakage once a month

Answer 13

Gift Card Liability
Revenue

Question 14

SL

Answer 14

cost - residual / useful life

Question 15

Units of Production

Answer 15

cost - residual / useful units (sum of all units) = dep/unit x # units used in year

Question 16

DDB

Answer 16

((1/useful life) x2) x Carrying amount

Question 17

Initial sale of Gift Card

Answer 17

Cash
Gift Card Liability

Question 18

When Gift Card is redeemed

Answer 18

Gift Card Liability
Revenue
COGS
Inv

Question 19

Provision

Answer 19

estimated liability that a company recognizes in its financial statements before the exact amount is known
So Adjust..
How much estimated - How much in reality

Question 20

Assurance Type Warranty

Answer 20

Basic warranty comes with the purchase price

Question 21

At POS of a Assurance Warranty

Answer 21

Warranty Expense
Warranty Provision

Question 22

Service Type Warranty

Answer 22

Optional cost, Second performance obligation

Question 23

At POS of a Service Warranty

Answer 23

Cash (of product and warranty)
Revenue (of product)
Unearned Warranty Revenue (of warranty)

Question 24

Cash Payment of a Bond

Answer 24

Face Value x Contract rate
payment will # will be the same throughout the term of the bond

Question 25

Interest Expense of a Bond

Answer 25

Carrying Value x Yield

Question 26

Lease at POS

Answer 26

Right of Use Asset Lease Liability

Question 27

Depreciating Lease

Answer 27

Dep Exp ROU asset Accum. Dep Exp

Question 28

When Lease Payments Are Made

Answer 28

Int Exp Lease Liability Cash

Question 29

Defined Contribution PP

Answer 29

a PP that specifies the amount a company has to contribute into its employee's pension fund Company only funds its defined amount

Question 30

Deine Benefit Plan

Answer 30

A PP that specifies the benefits that employees will receive in their retirement usually determined by amount of year worked and their highest salary

Question 31

Steps of a Case

Answer 31

To From Re Overview Users and Objectives Constraints (IFRS) Conflicts Primary Users and Objectives Analysis (use case ex copy paste) Issue Analysis Recommendation Conclusion