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Long-term liability
A financial obligation that is due more than one year in the future, often including loans, bonds, and other debts.
-bonds are always a long term liability
fiscal year
ends on a specific day due to the company’s type & season
-also called “accounting year”
-seasonal fluctuation in business
current liabilities
obligations the company is to pay within the next year or operating cycle, whichever longer
-ex: accounts payable,wages & salaries, notes payable,interest payable, income taxes payable,short-term debt
what do liabilities & stockholders equity classifies?
(what categories)
-current liabilites
-long term liabilities
-stockholders equity
stockholders equity
components
-common stock
*investments of assets into business by the stockholders
-retained earnings
*income retained for use in the business
how do assets classify?(what categories in order)
-current assets'
-long term investments
-property,plant,equipment
-intangible assets
nature of current assets
-assets a company expects to convert to cash or use up WITHING ONE YEAR of the OPERATING cycle,whichever is longer
common types:cash, investments,receivables,inventories,prepaid expenses
-companies list current asset accounts in the order they expect to convert them into cash (liquidity)
components of long-term investments
-investments in stock & bonds of other corporations that are held for more than one year
-primarily financial assets,bonds,stocks,real estate that aren’t used and are used for appreciation/income purposes./is not using in its operating activites
-long term notes receivable
property ,land,equipment
-asset with long useful lives
-currently used in operations
-ex:land,building,equipment,delivery vehicles,furtniture,machinery
-are DEPRECIATED: decrease in value (each year)
-cost is allocating to a # of years
-ACCUMULATED DEPRECIATION: total years costs of all depreciation
-total amount of depreciation expensed to date in an assets life
intangible assets
-assets that don’t have physical substacne
ex:copy rights,logo,companys reputation, patents, goodwill,trademark, trade names
-sometimes listed under “other assets”
-amortization
Depreciation
-FOR: tangible assets
-decrease in value each year
amortization
-FOR:intangible assets
-decrease in value each year
what is liquidity?
how fast you turn something into cash.
what does the classified balance sheet do?
-presents a snapshot at a point in time
-to improve understanding,companies group similar assets & similar liabilities together.
1.cash
2.short-term/debt investments
3.accounts/notes receivables
4.invetories
5.supplies
6.prepaid expenses/ etc
currents assets -in order
1.stock investments
2.investments in real estate
long term investments
land
buildings
equipment/machinary
less:accumulated depreciation
PP&E
1.acc payable
2.short-term debt
3.accrued liabilites
4.unearned sales revenue
5.salaries/wages
6.interest payable
current liabilities
1.mortgage payable
2.notes payable
3.bonds
4.lease
5.pension
long term liabilities
1.common stock
2.retained earnings
stockholders equity
net income-preferred dividends/weighted average common shares outstanding
earning per share
profitability ratios
measure the income or operating success of a company for a given period of time (income statement)
liquidity ratios
measure short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash (bs/current assets & liabilities)
solvency ratios
measure the ability of the company to survive over a long period of time (total liabilities) more liabilities=less chance to survive
