Studied by 3 people
uta
What is the primary purpose of any business?
Maximize value
Who are the Big 4 audit firms?
PriceWaterhouseCoopers
Deloitte
Ernst & Young
KPMG
GAAP requires that businesses use which type of accounting system?
Accrual basis system
What is the current ratio (working capital ratio)?
current assets/current liabilities
What is gross profit margin?
Sales - COGS
In a common size analysis, all of the items on the balance sheet should be expressed as a percentage of:
total assets
Which of the following are risks to being in business?
investing in assets
how the business is financed
hiring people
all of the above
all of the above
What does the Net Profit Margin Ratio (percentage) measure?
percentage of sales retained after taking out expenses
On the balance sheet, what do we call the money we have tied up in the things we intend to sell?
inventory
What is working capital (short term assets)?
current assets - current liabilities
__ arises when our interest conflict with another’s to whom we owe a duty.
conflict of interest
What is a duty of loyalty?
fiduciary duty
__ refers to when we figure out ways to increase our rewards for performance without actually improving our performance.
incentive gaming
What is an intentional deception for the purpose of personal or financial gain?
fraud
What is downwards earning management in a period of already depressed income?
big bath
What are earnings that are managed to maintain a steady improvement in income each year?
income smoothing
What do accountants use to record each day’s events?
general journal
What is used to bookkeep financial journals?
general ledger
When/who originally documented double-entry accounting?
1494 by Luca Pacioli
Why was double-entry accounting so important?
for the emergence of large-scale capitalist economies
What does the balance sheet measure?
financial position in a single point in time
What does the income statement measure?
operating performance between two points in time
What does the statement of cash flows measure?
operating performance under the cash basis of accounting
What are the three activities on the statement of cash flows?
operating
investing
financial
What uses information that is objective and verifiable, and documents an actual exchange transaction?
historical cost
What measures assets using updated values?
fair value
What measures assets at what you could get if you were to sell them?
net realizable value
What measures assets at how much it would cost to replace that asset?
replacement cost
What is on the balance sheet?
assets
liabilities
equity
How is a balance sheet organized?
in order of liquidity
What must be owned or controlled by a company and provide expected future benefits?
assets
What kind of asset is used/ turned to cash within one year?
current assets
What kind of asset takes longer than one year to turn to cash?
non-current assets
What is the amount paid in excess of the market value?
goodwill
What represents the obligations that a firm has to outside creditors?
liabilities
What are liabilities due within one year?
current liabilities
What are liabilities due after one year?
non-current liabilities
What is the value of the firm to its owners?
equity
What is the amounts paid directly to the firm in exchange for shares of ownership?
contributed capital
What is the portion of the income that the firm has earned over the years that has not been distributed to the owners in the form of dividends?
retained earnings (earned capital)
What are the notes to the financial statements?
significant accounting policies
material information not disclosed in the F/S
important details about line items in the F/S
