CHAPTER 2 Flashcards
What is the value of a classified balance sheet?
to improve understanding, companies’ group similar assets and similar liabilities together - presents a snapshot at 1 point in time.
Standard Classifications - Assets
Current Assets
Long term investments
PPE (property, plant, equipment)
Intangible Assets
Standard Classifications - Liabilities and SE
Current Liabilities
Long term liabilities
stockholder’s equity
What is the equation for a Classified Balance Sheet
A=L+SE
Current Assets (cash, short term investments, receivables (within 1 year), prepaid, supplies, inventory, etc)
Long-Term Investments
PPE
Intangible Assets
=
Current liabilities and Long-Term Liabilities (also includes current portion of long-term debt)
+
Common Stock
Retained Earnings
What do you have to calculate (sometimes) with PPE
Accumulated depreciation / Depreciation based on Book Value
True or False - Intangible assets are never called “Other Assets”
False - Intangible assets are sometimes referred to as Other Assets
Do you calculate Accumulated Depreciation in the Classified Balance Sheet?
Yes - for example: PPE
PPE subtitle
Land
Equipment
Less: Accumulated Depreciation - equipment: $$$
Subtotal:
What are Current Assets?
Cash, Short Term Investments, receivables, prepaid, supplies, and inventory
What is the Liquidity Ratio for Working Capital?
Part 1: Working Capital = Current Assets - Current Liabilities
WC=CA-CL
Part 2: Current Ration = Total Current Assets / Total Current Liabilities = ____ to 1
CA/CL=___ to 1
What is the Liquidity Ratio for Solvency/Debt Ratio?
Debt Ratio = Total Liabilities / Total Assets = %
TL/TA = %
If the percentage result from a debt ratio has gone up (higher number) - has it improved or declined?
Declined - the lower the percentage, the less dept the company has.
