Exam 1 Study Material

Question 1

Assets=

Answer 1

Liabilities + Equities

Question 2

Sales-COGS=

Answer 2

Gross Profit

Question 3

Gross Profit- Operating expenses=

Answer 3

Operating income

Question 4

Operating Income +- other income (expenses)=

Answer 4

Income before taxes

Question 5

Income before taxes- tax expense=

Answer 5

Net income

Question 6

ROE=

Answer 6

Net Income/Shareholder’s Equity

Question 7

ROA=

Answer 7

Net Income/ Average total assets

Question 8

Profit Margin

Answer 8

Net Income (Revenue-Cost)/Net Sales (Revenue)

Question 9

Asset Turnover Ratio

Answer 9

Net Sales/Average total assets

Question 10

MD&A

Answer 10

Management Discussion and Analysis, bias- what’s going on

Question 11

Independent Auditor report

Answer 11

Fairly representing the organization, types: unqualified, qualified, adverse, disclaimer

Question 12

Current Assets

Answer 12

Cash, cash equivalents, short-term investments, AR, inventory, prepaid expenses

Question 13

Long-term Assets

Answer 13

PPE, long term investments, intangible and other assets (trademark, patent)

Question 14

Current Liabilities

Answer 14

AP, Accrued liabilities, deferred revenue, short-term debt, current maturities of long-term debt

Question 15

Net working capital

Answer 15

current assets-current liabilities

Question 16

Non-current liabilities

Answer 16

long-term debt(notes, mortgages, bonds, debentures, and other long-term loans, non-current liabilities (more than a year)

Question 17

Stockholder’s Equity (Contributed Capital)

Answer 17

Common stock, additional paid-in capital, preferred stock, treasury stock

Question 18

Stockholder’s Equity Earned Capital

Answer 18

Retained Earnings, accumulated other comprehensive income or loss

Question 19

Ending Retained Earnings

Answer 19

Beginning Retained Earnings+ Net income- Dividends- Stock repurchased and retired

Question 20

What is different about a common-sized balance sheet

Answer 20

Expresses the balance sheet in % terms, vertical analysis & right-sizing, every line item of the balance sheet is divided by total assets

Question 21

Why is a common-size balance sheet a thing?

Answer 21

can compare the same company across two or more years, compare different companies, compare industry

Question 22

Stockholders’ equity

Answer 22

book value, value of company per GAAP

Question 23

Market Value

Answer 23

number of common shares outstanding X company’s stock price

Question 24

Accrual: Revenue Recognition Principle

Answer 24

revenue is recognized when a performance obligation is satisfied by transferring to a customer a promised good or service EX. shipping- goods are transferred when placed in the truck

Question 25

Accrual: Expense Recognition Principle

Answer 25

Recognize expenses when incurred

Question 26

Operating Expenses

Answer 26

usual and customary costs a company incurs to support its operating activities

Question 27

Nonoperating Income/Expenses:

Answer 27

relate to the company's financing and investing activities

Question 28

Discontinued operations (transitory items)

Answer 28

a disposal of a business unit that represents a strategic shift that can have a major effect on the company's financial results

Question 29

Gross profit Margin

Answer 29

gross profit/sales

Question 30

operating expense margins

Answer 30

operating expense/sales

Question 31

Common Sized Income statement

Answer 31

Every line item on the income statement divided by total revenue

Question 32

Which Fin Statement: Cash Asset

Answer 32

BS & SCF

Question 33

Which Fin Statement: Expenses

Answer 33

IS

Question 34

Which Fin Statement: Noncash assets

Answer 34

BS

Question 35

Which Fin Statement: Contributed Capital

Answer 35

BS and SE

Question 36

Which Fin Statement: Cash outflow from capital expenditures

Answer 36

SCF

Question 37

Which Fin Statement: Retained Earnings

Answer 37

BS and SE

Question 38

Which Fin Statement: Cash outflow for stock issued

Answer 38

SCF and SE

Question 39

Which Fin Statement: Cash outflow for dividends

Answer 39

SCF and SE

Question 40

Which Fin Statement: Revenue

Answer 40

IS

Question 41

What are the 4 different types of accounting adjustments

Answer 41

prepaid (deferred) expenses, unearned revenue, accrued expenses, accrued revenue

Question 42

SWOT Analysis

Answer 42

Strengths, weakness, opportunities, threats