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48 Cards in this Set
- Front
- Back
What is balance sheet? |
- aka statement of financial position - report assets, liabilities, and Stockholder's Equity of an enterprise at a specific date |
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What is liquidity? |
amount of time that is expected to elapse until an asset is realized or otherwise converted into cash or until liability has to be paid |
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What is solvency? |
ability of a company to pay its debts as they mature |
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What is financial flexibility? |
measure the ability of an enterprise to take effective actions to alter the amounts and timing of cash flows so it can respond to unexpected needs and opportunities |
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What are assets? |
- probably future economic benefits obtained or controlled by a particular entity as a result of past transactions or events |
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What is liabilities? |
probably future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of a past transaction or events |
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What is equity? |
- residual interest in the assets of an entity that remains after deducting its liabilities - aka ownership market |
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What are current assets? |
cash and other assets a company expects to convert into cash, sell, or consume either in one year or in the operating cycle, whichever is longer |
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What are the 3 portfolios for debt and equity securities? |
- held to maturity - trading - available-for-sale |
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What is held-to-maturity portfolio? |
debt securities that a company has the positive intent and ability to hold to maturity |
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What is trading portfolio? |
debt and equity securities bought and held to primarily for sale in the near term to generate income on short-term price |
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What is the available-for-sale portfolio? |
debt and equity securities not classified as held to security or trading securities |
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What are long-term investments? |
- expected to be held for many years - tangible fixed assets not currently used in operations - bonds, securities, common stocks or long-term notes - set aside in special funds - nonconsolidated subsidiaries or affilliated companies |
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What is property, plant, and equipment? |
tangible long life assets used in the regular operations of the business |
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What are intangible assets? |
lack physical substance and are not financial instruments - EX: patents, copyrights |
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What are current liabilities? |
obligations that a company reasonably expects to liquidate either through the use of current assets or the creation of other current liabilities |
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What is working capital? |
excess of total current assets over total current liabilites |
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What are long-term liabilities? |
obligations that a company doesn't reasonably expect to liquidate within the normal operating cycle - EX: bonds payable |
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What is captial stock? |
par or stated value of the shares issued |
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What is additional paid-in capital? |
excess of amounts paid in over the par or stated value |
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What is retained earnings? |
company's undistributed earnings |
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What is the account form? |
- 1 common arrangement that companies use in presenting a classified balance sheet - lists assets, by sections on the left side, and liabilities and Stockholder's equity on the other |
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What is the report form? |
lists the sections above one another on the same page for balance sheet - order of assets, liabilities, then equity |
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What is the primary purpose of the statement of cash flows? |
- provide relevant information about the ash receipts, and cash payments of an enterprise during a period - reports; operating activities, investing activities, financing activities, and net (+/-) in cash during the period |
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What is operating activities? |
involves the cash effect of transactions that enter the determination of net income |
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What is investing activities? |
include making and collecting loans and acquiring and disposing of investments and property, plant, and equipment |
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What are financing activities? |
- involve liability and owner's equity items - include = obtaining resources from owners and providing them with a return on their investments = borrowing money from creditors and repaying the amounts borrowed |
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What is the sources of the statement of cash flows? |
- comparative balance sheets - current income statements - selected transaction data |
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What are the steps of statement of cash flows? |
- determine cash provided or used by operating activities - determine cash provided or used in investing and financing - determine the change in cash during the period - recognize the change in cash with the beginning and ending cash balances |
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What questions does statement of cash flows asnwer? |
- how successful is the company in generating net cash provided by operating activities - what are the trends in net cash flow provided by operating activities over time - what are the major resources for the (+/-) net cash provided by operating activities |
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What is the current cash coverage ratio? |
indicates whether the company can pay off its current liabilities from its operations in a given year - net cash provided by operating activities/average current liabilites |
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What is cash debt coverage ratio? |
- provides information on financial flexibility - IDs a company's ability to repay its liabilities from net cash provided by operating activities, without having to liquidate the assets employed in its operations - net cash provided by operating activities/average total liabilites |
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What is free cash flow? |
- amount of discretionary cash flow a company has - net cash provided by operating activities minus capital expenditures minus dividends |
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What are questions free cash flows answer? |
- is the company able to pay its dividends without resorting to external financing? - If business operations decline, will the company be able to maintain its needed capital investment? - what is the amount of discretionary cash flow that can be used for additional investments, retirement of debt, purchase of treasury stocks or addition to liquidity |
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What are contingencies? |
material events that have an uncertain outcome |
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What are accounting policies? |
explanations of the valuation methods used or the basic assumptions made concerning inventory valuations, depreciation methods, investments and subsidiaries, etc. |
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What are contractual situations? |
explanations of certain restrictions or covenants attached to specific assets, or, more likely to liabilities. |
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What are fair values? |
disclosure of fair values, particularly for financial investments |
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What is contingency? |
existing situation involving uncertainty as to possible (+/-) that will ultimately be resolved when 1 or more future events occur or fail to occur |
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What are techniques for disclosure? |
- parenthetical explanations - notes - cross-reference and contra items - supporting schedules |
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What is the usefulness of the balance sheet? |
- provide financial information a bout a company at a given point in time = liquidity, solvency financial flexibility, and operating capability of a business entity |
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What are assets? |
resources with future economic benefit to a business entity as a result of a past transaction
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What are current assets? |
cash and other assets that are reasonably expected to be realized in cash or sold or consumed during a normal operating cycle or one year whichever is longer |
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What are long-term investments? |
- comprised of; securities, fixed assets, special funds, nonconsolidated subsidiaries or affiliated companies |
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What is property plant, and equipment? |
- assets used in the firm's operations and meet the following criteria; = economic life of 7 or more years = acquired for use in operations = not for resale to customers = has materiality |
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What are intangible assets? |
assets with no physical substance but have value based on rights or privledges that belong to the owner |
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What are other assets? |
- includes assets sufficiently different from other assets in the category EX: long-term prepayments, deferred income tax |
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What are liablilties? |
legal obligations requiring future payments of assets or services as a result of a business entity's past transactions or events |