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ACC 122 > Exam 2 > Flashcards

Exam 2 Flashcards

1
Q

Securities that are held with the intent of selling them sometime in the future.

A

Available-for-sale securities

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2
Q

Financial statements that present the assets and liabilities controlled by the parent company and the total revenues and expenses of the subsidiary companies.

A

Consolidated financial statements

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3
Q

Ownership of more than 50% of the common stock of another entity.

A

Controlling interest

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4
Q

An accounting method in which the investment in common stock is recorded at cost and revenue is recognized only when cash dividends are received.

A

Cost method

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5
Q

Investments in government and corporation bonds.

A

Debt investments

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6
Q

An accounting method in which the investment in common stock is initially recorded at cost, and the investment account is the adjusted annually to show the investors equity in the investee.

A

Equity method

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7
Q

Amount for which a security could be sold in a normal market.

A

Fair value

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8
Q

Debt securities that the investor has the intent and ability to hold to maturity.

A

Held to maturity securities

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9
Q

A group of stocks and/or debt securities in different corporations held for investment purposes.

A

Investment portfolio

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10
Q

Investments that are not readily marketable or that management does not intend to convert into cash within the next year or operating cycle, whichever is longer.

A

Long-term investments

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11
Q

A method of accounting for certain investments that requires that they be adjusted to their fair value at the end of each period.

A

Mark-to-market

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12
Q

A company that owns more than 50% of the common stock of another entity.

A

Parent company

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13
Q

Investments that are readily marketable and intended to be converted into cash within the next year or operating cycle, whichever is longer.

A

Short-term investments (marketable securities)

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14
Q

Investments in the capital stock of corporations.

A

Stock investments

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15
Q

A company in which more than 50% of its stock is owned by another company.

A

Subsidiry (affiliated) company

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16
Q

Securities bought and held primarily for sale in the near term to generate income on short-term price differences.

A

Trading securities.

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17
Q

A measure used to evaluate a company’s liquidity and short-term debt-paying ability; calculated as Current assets/Current liabilities

A

Current ratio

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18
Q

A measure of the liquidity of inventory. Measures the nuber of times average inventory was sold during the period; computed as Cost of goods sold/Averge inventory

A

Inventory turnover

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19
Q

A measure of the average number of days that inventory is held; computed as 365 days/Inventory turnover

A

Days in inventory

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20
Q

A measure of the liquidity of receivables; computed as Net credit sales/Average net accounts receivable

A

Accounts Receivable Turnover

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21
Q

The average number of days that receivables are outstanding; calculated - 365 days/Accounts receivable turnover

A

Average collection period

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22
Q

A measure of the percentage of total financing provided by creditors; computed as Total liabilities/Total assets

A

Debt to assets ratio

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23
Q

A measure of a company’s solvency and ability to meet interdty psyments as they come due; calculated as the sum of Net income + Interest expense + Income tax expense/Interest expense

A

Times interest earned

24
Q

A measure of solvency. Cash remaining from operating activities after adjusting for capital expenditures and dividends paid. Net cash provided by operating activities - Capital expenditures - Cash dividends

A

Free cash flow

25
Q

A measure of the dollars of net income earned for each dollar invested by the owners; computed as Income available to common stockholders (Net income - Preferred dividends)/Average common stockholders’ equity

A

Return on common stockholders’ equity

26
Q

A profitability measure that indicates the amount of net income generated by each dollar of assets; calculated as Net Income/Average total assets

A

Return on assets

27
Q

A measure of the net income generated by each dollar of net sales; computed as Net income/Net sales

A

Profit margin

28
Q

A meaure of how efficiently a company uses its assets to generate net sales; computed as Net sales/Average total assets

A

Asset turnover

29
Q

Gross profit expressed as a percentage of net sales; computed as Gross profit/Net sales

A

Gross profit rate

30
Q

The net income earned by each share of outstanding common stock; computed as Net income - preferred dividends/Weighted-average common shares outstanding

A

Earnings per share

31
Q

A comparison of the market price of each share of common stock to the earnings per share; computed as the Market price per share/Earning per share

A

Price-earnings ratio

32
Q

A measure of the percentage of earnings distributed in the form of cash dividends; calculated as Cash dividends paid on common stock/Net income

A

Payout ratio

33
Q

Securities that are held with the intent of selling them sometime in the future.

A

Available-for-sale securities.

34
Q

Use of an accounting principle in the current year that is different from the one used in the preceding year.

A

Change in accounting principle.

35
Q

The sum of net income and other comprehensive income items.

A

Comprehensive income.

36
Q

The disposal of a significant component of a business.

A

Discontinued operations.

37
Q

A technique for evaluating a series of financial statement data over a period of time to determine the increase (decrease) that has taken place, expressed as either a dollar amount or a percentage.

A

Horizontal analysis

38
Q

Borrowing money at a lower rate of interest than can be earned by using the borrowed money; also referred to as a trading on the equity.

A

Leveraging

39
Q

Measures of the short-term ability of the company to pay its maturing current obligations and to meet unexpecgted needs for cash.

A

Liquidity ratios

40
Q

Measures of the income or operating success of a company for a given period of time.

A

Profitability ratios

41
Q

A measure of income that usually excludes items that a company considers unusual or non-recurring.

A

Pro forma income

42
Q

Indicates the level of full and transparent information that is provided to users of the financial statements.

A

Quality of earnings

43
Q

The mathematical relationship between one quantity and another. The relatioship may be expressed either as a percentage, a rate, or a simple proportion.

A

Ratio

44
Q

A technique for evaluating financial statements that expresses the relationship between selected financial statement data.

A

Ratio analysis

45
Q

Measures of the ability of a company to survive over a long period of time, particularly to pay interest as it comes due and to repay the balance of debt at its maturity.

A

Solvency ratios

46
Q

The most likely level of income to be obtined by a company in the future.

A

Sustainable income

47
Q

Borrowing money at a lower rate of interest than can be earned by using the borrowed money; also referred to as leveraging.

A

Trading on the equity

48
Q

Securities bought and held primarily for sale in the near term to generate income on short-term price differences.

A

Trading securities

49
Q

A technique for evaluating financial statement data that expresses each item in a financial statement as a percentage of a base amount.

A

Vertical analysis

50
Q

A method of preparing a statement of cash flows that shows operating cash receipts and payments. It is prepared by adjusting each item in the income statement from the accrual basis to the cash basis.

A

Direct method

51
Q

Cash flow activities that include (a) obtaining cash from issuing debt and repaying the amounts borrowed and (b) obtaining cash from stockholders, repurchasing shares, and paying dividends.

A

Financin activities

52
Q

Net cash provided by operating activities adjusted for capital expenditures and cash dividends paid.

A

Free cash flow

53
Q

A method of preparing a statement of cash flows in which net income is adjusted for items that do not affect cash, to determine net cash provided by operating activities.

A

Indirect method

54
Q

Cash flow activities that include (a) purchasing and disposing of investments and property, plant, and equipment using cash and (b) lending money and collecting the loans.

A

Investing activities

55
Q

Cash flow activities that include the cash effects of transactions that generate revenues and expenses and thus enter into the determination of net income.

A

Operating activities

56
Q

A basic financial statement that provides information about the cash receipts, cash payments, and net change in cash during a period, resulting from operating, investing, and financing activities.

A

Statement of cash flows

ACC 122 (4 decks)

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