acct exam 3

working capital

provides one measure of liquidity (working capital=current assets-current liabilities)

liquidity

a company’s ability to convert its assets to cash to meet its current liabilities (short term)

solvency

a company’s ability to pay all its liabilities, short-term and long-term, as well as be able to respond to challenges and opportunities.

sustainability disclosures

environmental, social and governmental

proxy statement

announces date and time of the annual meeting of shareholders along with ay matters that will be voted on.

md&a

managment discussion and analysis- placed at the beggining of the annual report and includes risks, future outlook and performance.

unqualified auditors report

(best) a clean opinion that financial statements provide a fair presentation and conform to GAAP

unqualified with explanation auditors report

the auditor believes the financial statements conform to GAAP but feels there are some specific items that should be given special attention

qualified auditors report

the audit process was limited or there is a departure from GAAP

adverse opinion or disclaimer auditor report

seriously misstated or misleading, or the auditor is unable to gather sufficient information to assess the financial situation.

comparative financial statements

Users compare this years financial statements to previous ones

horizontal analysis

users examine financial statement items as a percentage of a base amount from a prior year

vertical analysis

users examine financial statement items as a percentage of a base amount from the same year

ratio analysis

users compare aspects of financial performance relative to other aspects and then compare that performance to other companies or itself over time

financial leverage

greater finacial leverage equals more debt

present value

a single amount asking what is 1000 worth TODAY

future value

a sin gle amount asking what is 1000 worth in the FUTURE (5 years)

simple interest

interested compunded on the principal amount only

compounded in interest

interest is charged on the principal and any accrued interest.

pva and fva

end of each period

pvad and fvad

begginning of each period

book value

value that comes frm financial records

market value

what investors think its worth

footnotes

extra details not shown in statements (inclusdes

stated rate

interest rate, coupon rate- used to find annuity amount

market rate

discount rate- used for the table