Exam 1: Chapters 1-3 Flashcards
(67 cards)
IMRS
Identify
Measure
Record
Summarize
liquidity
has enough money to continue business, handle unexpected situations, new business opportunities
profitability
ability to earn adequate return on investments
profit margin ratio
net income / revenue
income statement: single step format
revenues TOTAL REVENUES expenses TOTAL EXPENSES NET INCOME/LOSS
return on assets ratio
net income / average total assets
income statement: multi-step format
net sales cost of goods sold GROSS MARGIN Operating Expenses TOTAL OPERATING EXPENSES INCOME FROM OPERATIONS other income and expenses income before income taxes income taxes expense NET INCOME/LOSS
statement of retained earnings
beginning retained earnings
add: net income
less: dividends
ending retained earnings
operating activities
use funds and assets to earn customers and profits; operating business to earn profit
financing activities
acquiring funds to build and operate business, obtaining funds to begin and operate business
investing activities
use funds to buy assets to generate revenues
balance sheet
Assets: Current Assets TOTAL CURRENT ASSETS Property, plant, and equipment (including accumulated depreciation) TOTAL PPE Long term/intangible assets TOTAL LONG TERM/INTANGIBLE TOTAL ASSETS Liabilities and Stockholders' Equity: Current Liabilities TOTAL CURRENT LIABILITIES Long term liabilities TOTAL LONG TERM LIABILITIES Stockholders' equity TOTAL STOCKHOLDERS' EQUITY TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
accounting equation
A = L + SE
current assets
expected to be used up within one year or business operating cycle, whichever is longer
long term assets
useful life is longer than one year/operating cycle
intangible assets
trademarks, logos, franchise rights
also a long term asset
common stock/contributed capital
capital contributed to the company in exchange for ownership
retained earnings account
the accumulated net income of a company that has not been distributed to owners in the form of dividends
creditor
the person to whom the corporation owes money
revenue
the increase in asses that results from the sale of products or services
expense
the cost of assets used, or the liabilities created, in the operation of the business
the balance sheet reports…
the resources (assets) owned by a company and the claims against those resources (liabilities and SE) at a specific point in time
the income statement reports…
how well a company has performed its operations (revenues, expenses, income) over a period of time
the retained earnings statement reports…
how much of the company’s income was retained in the business and how much was distributed to owners over a period of time
