TEST 3 Flashcards
if the likelihood of a future obligation arising is PROBABLE and its amount can be REASONABLY ESTIMATED
a liability is recognized in the financial statements
if the likelihood is REASONABLY POSSIBLE but not likely or if its probable but CANNOT BE REASONABLY ESTIMATED
no liability is reported on the balance sheet
if the likelihood is REMOTE
no liability need be recognized in the financial statements or disclosed in the notes to the statement
working capital
current assets - current liabilities
current ratio
current assets / current liabilities
average days to sell inventory
365 / inventory turnover
inventory turnover
cost of goods sold / average inventory
average days to collect receivables
365 / accounts receivable turnover
accounts receivable turnover
net credit sales / average receivables
sole proprietorship
owned by a single individual who is responsible for making business and profit distribution decisions
partnership
business entities owned by at least two people who share talents, capital, and the risk of the business
corporation
legal entity separate from its owners; formed when a group of individuals with a common purpose join together in an organization according to state laws
double taxation
policy to tax corporate profits distributed to owners twice, once when the income is reported on the corporations income tax return and again when the dividends are reported on the individuals return
authorized stock
number of shares that the corporation is approved by the state to issue
issued stock
stock sold to the public
