Financial Analysis and Reporting Flashcards
(129 cards)
1
Q
Applies multiple times the straight-line rate to the declining book value (cost minus accumulated depreciation) to achieve a declining depreciation charge over the estimated life of the asset.
A
Declining-Balance Method
2
Q
Deduction from the original value of the fixed assets.
A
Depreciation
3
Q
information is material if its omission or misstatement
could influence economic decisions.
A
Materiality Concept
4
Q
The depreciation expense declines steadily over the estimated life of the asset. This method takes a fraction each year times the cost less salvage value.
A
Sum-of-the-years’-Digits Method
5
Q
Types of Intangible Assets (5)
A
Trademarks
Patents
Copyrights
Goodwill
Franchise
6
Q
Who demand for financial accounting information (7)
A
- Managers and Employees
- Investors and Analysts
- Creditors and Suppliers
- Stakeholders and Directors
- Regulatory and Tax Agencies
- Customers and Potential Strategic Partners
- Other decision makers
7
Q
Assets that do not physically exist.
A
Intangible Assets
8
Q
It is a form of business organization that has unlimited liability and limited life (2)
A
Sole proprietorship
Partnership
9
Q
How many incorporators does corporation have?
A
atleast 5-15 incorporators
10
Q
involve income statement items.
A
Operating Activities
11
Q
Effort of the firm to create sales, includes advertising, sales
commissions, sales supplies used.
A
Selling
12
Q
EBT meaning
A
Earnings Before Taxes
13
Q
is the process of allocating the cost of buildings and machinery over the periods benefited.
A
Depreciation
14
Q
3 Factors to consider when computing depreciation
A
Asset Cost
Length of the life of the asset
Salve value when retired from service
15
Q
logical reasoning in the form of a set of broad principles. It comprises the Conceptual Framework and Philippine
Financial Reporting Standards (PFRS)
A
Accounting Theory
16
Q
It is a form of business organization that has a limited liability and unlimited life
A
Corporation
17
Q
all of the concepts of a complete set of financial
statements are interrelated.
A
Concept of Articulation
18
Q
Methods to compute depreciation (4)
A
Straight-Line Method
Declining-Balance Method
Sum-of-the-years’-Digits Method
Unit-of-Production Method
19
Q
A statement of a firm’s position at a specific point of time
A
Statement of Financial Position
Balance Sheet
20
Q
It is a form of business organization that has more government regulations
A
Corporation
21
Q
Frequently refer as Statement of Operations, Statement of
Income, Statement of Earnings.
A
Income Statement
22
Q
assets that are expected to be converted to cash within a year. Listed in order of liquidity
A
Current Assets
23
Q
2 Users of Financial information
A
Internal decision maker (management)
External decision makers
24
Q
This follows GAAP and comes first before financial management
A
Accounting
25
Types of Current Liabilities
Payables
- Accounts Payable
- Wages Payables
- Taxes Payables
Unearned Income
Other Current Liabilities
26
Cost of Goods sold is equal to beginning inventory plus
purchases minus ending inventory
Retailing Firm
27
A statement that shows by how much a firm’s equity changed during the year and why this change occurred.
Statement of Stockholders' Equity
28
measures operating income per amount of sales.
operating margin
29
Objectives of financial statements (4)
1. Providing Information for Economic Decisions
2. Providing Information about Financial Position
3. Providing Information about Performance of an Enterprise
4. Providing Information about Changes in Financial Position
30
Money owed to a company by customers for products
or services provided on credit.
Accounts Receivable
31
Reports that summarize important financial accounting information about the
business.
Financial Statements
32
2 major parts of stockholders' equity
Contributed Capital
- Common stock
- Preferred Stock
Retained Earnings
33
Reported as Net in the Income Statement
Sales (revenue)
34
Depreciation to the output capacity of the asset, estimated for the life of the asset.
Unit-of-Production Method
35
reports on a company’s performance over a period of time and lists amounts for revenues, expenses and other
comprehensive income.
Statement of Comprehensive Income
36
each accountable event is recorded in two parts.
Double-entry system
37
2 Types of accounting information for the users:
General Purpose Accounting Information
Special Purpose
38
It is called the "Language of the Business."
Accounting
39
It is a form of business organization that has unlimited capital
Corporation
40
Represents a company’s net worth.
Stockholders' Equity
41
PFRS
Philippine Financial Reporting Standards
42
It is used for future planning and deals with procurement ang allocation of financial resources.
Financial Management
43
the accounting objective is neither proper income
determination nor proper valuation of assets but the custody and
administration of funds. This objective directed towards cash flows.
Fund Theory
44
report the change (either an increase or decrease) in a
company’s cash balance over a period of time.
Statement of Cash Flows
45
Important to businesses because they are used to fund the daily
operations and pay short-term obligations.
Current Assets
46
Probable future sacrifices of economic benefits arising from present obligations of an entity to transfer assets or provide services to other entity in the future as a result of past transactions.
Liabilities
47
Probable future economic benefits obtained or controlled by an entity as a result of past transactions or events. It can be physical/tangible or intangible
Assets
48
3 aspects of communicating
recording
classifying
summarizing
49
EBITDA meaning
Earnings Before Interest, Taxes, Depreciation, and Amortization
50
cost of processing and communicating information should not expaceed the benefits to be derived from it.
Cost-benefit
51
the entity is viewed separately from its owners.
Separate Entity
52
types of profitability ratios
operating margin
profit margin
return on total assets (roa)
return on common equity (roe)
53
Cost of Goods manufactured replaces purchases since
the goods are produced rather than purchased.
Manufacturing Firm
54
are short-term investments that can be easily converted into cash.
Cash Equivalents
55
this principle recognizes that the nature and amount of information included in the financial statements reflect a
series of judgmental trade-offs.
Full disclosure principles
56
reports a company’s financial
position at a point in time, the company’s resources (assets) namely, what the
company owns and also the sources of asset financing.
Statement of Financial Position
57
________ is physical currency.
Cash
58
have higher claim to dividends or asset distribution than common stockholders
Preferred Stock
59
Owned by 1 person
Sole Proprietorship
60
the value of an asset is determined based on
acquisition cost.
Historical Cost Concept
61
2 ways a company can finance its assets:
Owner Financing
Non-owner Financing
62
A report that shows all transactions affecting cash flow
Statement of Cash Flow
63
is accumulated in a separate account.
Depreciation Expense
64
Amount of taxes owed by the firm to a taxing authority.
Taxes Expense
65
A report that shows how items that affect the balance sheet and income statement affect the firm’s cash flows.
Statement of Cash Flow
66
it is the process of identifying, measuring, and communicating
economic information to permit informed judgements and decisions by users of
the information.
Accounting
67
generally relate to long-term liability and stockholders’
equity items.
Financing Activities
68
Accounting Equation
Assets = Liabilities + Stockholder's Equity
69
3 Types of noncurrent assets
Tangible Assets
Intangible Assets
Depreciation
70
It is not a statutory requirement, and comes after accounting
Financial Management
71
are written records that disclose the business activities and the financial performance of a company.
Financial Statements
72
These are resources owned by a company
Assets
73
Recognizes depreciation in equal amounts over the estimated life of the asset
Straight-Line Method
74
assets, liabilities, equity, income and expenses are stated in terms of a common unit of measure, which Philippine Peso.
Monetary Unit Assumption
75
is subtracted from the cost of a plant and equipment.
Accumulated Depreciation
76
Characterized by their marketability at a readily
determinable market price
Marketable Securities
77
These assets are important to a company because these illiquid investments can help a company to generate profits
Non-current assets
78
the accounting objective is geared towards the proper
valuation of assets.
Proprietary Theory
79
the financial statements are prepared based on
accounting principles that are applied consistently from one period to the
next.
Consistency Concept
80
recognized as expenses when the related revenue is
recognized.
Matching costs
81
3 Forms of Business Organization
Sole Proprietorship
Partnership
Corporation
82
General administration of the firm’s operations, includes salaries, insurance, telephone, bad debt expense, and other costs difficult to allocate
Administrative
83
3 Types of information provided by accounting
Quantitative
Qualitative
Financial information
84
Process of analyzing events and transactions to determine
whether or not they will be recognized.
Identifying
85
Held for business use to generate income and not expected to be converted to cash in a year.
Tangible Assets
86
Not expected to be converted into cash in one year and are used to support the firms’ operations.
Non-Current Assets
Fixed Assets
Long-term assets
87
process of transforming economic data into useful
accounting information, such as financial statements and other
accounting reports, for dissemination to users.
Communicating
88
Type of tangible assets (4)
Land
Buildings
Machinery and Equipment
Furniture
89
Summarizes revenues and expenses and gains and losses, and ends with the net income for a specific period.
Income Statement
90
refers to the principles upon which the process of
accounting is based.
Accounting Concepts
91
Owned by two or more
Partnership
92
Classifies cash receipts and cash payments into operating, investing, and financing activities.
Statement of Cash Flow
93
It is a form of business organization that is easy to form and has more capital than sole proprietorship
Partnership
94
Provide a basis to examine how a firm is doing, its current resources, and its financial policies
Financial Statements
95
Types of Current Assets (5)
Cash and Cash Equivalents
Marketable Securities
Accounts Receivable
Inventories
Prepaids
96
Companies retain net income after distributing dividends to shareholders.
Retained Earnings
97
2 Types of operating expenses
Selling
Administrative
98
3 Important activities in accounting
Identifying
Measuring
Communicating
99
EBIT meaning
Earnings Before Interest, and Taxes
100
It is valuated by fact or opinion.
By fact: measured by cash
By opinion: estimation
Measuring
101
is the use of caution when making estimates under conditions of uncertainty, such that assets or income are not overstated, and
liabilities or expenses are not understated.
Conservatism
102
Difference between the value of all assets and all liabilities.
Stockholders' Equity
103
Something a person or company owes, usually a sum of money.
Liabilities
104
the effects of transactions and other events are recognized when they occur and not as cash is received or paid.
Accrual Basis of Accounting
105
shares in all stockholders’ rights and represents ownership that has voting and liquidation rights.
Common Stock
106
the accounting objective is geared towards proper income
determination.
Entity theory
107
reports on changes in key types of equity over a period of time.
Statement of Stockholders' Equity
108
It is a statutory requirement.
Accounting
109
Do not have cost of goods sold but often have cost of services.
Service Firm
110
Involves evaluation of trends in the firm’s financial position over time.
Financial Analysis
111
the life of entity is divided into series of reporting periods - Calendar year or fiscal year
Time Period
112
expenses incur during operations.
Operating Expenses
113
It is a record of the historical transactions and it record transactions in a systematic manner for a particular period..
Accounting
114
Types of noncurrent liabilities
Long-term debts
Long-term accrued liabilities
115
It is a form of business organization that has a limited capital
Sole Proprietorship
116
the entity is assumed to carry on its operations for an indefinite period of time.
Going concern assumption
117
represent revenue from goods or services sold to customers. The firm earns revenue from the sale of its principal products.
Sales (revenue)
118
Balance of goods on hand. Includes raw materials, work in
process, finished goods available for sale, and supplies.
Inventories
119
the process of converting non-cash assets into cash or claims for
cash.
realization
120
received from shareholders for stock.
Contributed Capital
121
Liabilities that must be repaid in one year.
Current Liabilities
122
Obligations due more than one year into the future.
Non-Current Liabilities
123
involves assigning numbers, normally in monetary terms, to
the economic transactions and events.
Measuring
124
this theory is applicable when there are two classes
of shares issued, i.e., ordinary and preferred
Residual equity theory
125
4 Types of Financial Statements
Statement of Financial Position (Balance Sheet)
Income Statement
Statements of Cash Flow
Statements of Stockholders' Equity
126
fundamental concepts or principles and basic
notions that provide the foundation of the accounting process.
Accounting Assumptions
127
This financial statement consists of: (3)
Assets
Liabilities
Stockholders' Equity
128
Expenditure made in advance of the use of the service or goods.
Prepaids
129
It is a form of business organization that is time consuming
Corporation
