accounting

Classified balance sheet

a classified balance sheet groups together similar assets and similar liabilities, using classifications and sections.

What are current assets?

current assets are company-owned assets that can be converted to cash within one year or the end of the operating cycle. Whichever is longer

Operating cycle

• operating cycle is the average time it takes to go from cash to cash

• For most businesses, the cycle is less than a year

What are long-term investments?

• investments that are held for more than one year

• loans and bonds are long-term investments

What are debt investments?

debt investments are when you lend money to someone, like a company, and in return, they promise to pay you back with interest. Common types of debt investments are bonds and loans

What is Property, plant, and equipment assets?

• Assets with long useful lives that are currently used in operating the business

  Examples: Land, buildings, equipment, vehicles, and furniture

Depreciation

• a way of spreading out the cost of a big purchase over time.

• When a business buys something like equipment, machinery, or a vehicle, that item loses value as it gets older and wears out. Instead of taking the whole cost as an expense right away, businesses use depreciation to gradually reduce the value of the item on their books each year

accumulated depreciation

accumulated depreciation account shows the total of depreciation that a company has taken so far on its assets.

What are intangible assets?

• Assets that do not have a physical substance yet are often valuable

• assets that give you rights

  • Examples: goodwill, copyrights, patents, franchises, trademarks

list 5 common current assets in order of liquidity

1. Cash

2. Investment (short term)

3. Receivables- notes receivable, accounts receivable

4. Inventories

5. Prepaid Expenses- prepaid insurance, prepaid rent, supplies

What are current liabilities?

current liabilities are obligations that the company is to pay within the coming year or operating cycle

What are long-term liabilities and what are some examples?

• Obligations that a company expects to pay after one year

  • Examples: long term notes payable, bonds payable, mortgages payable, lease liabilities, pension liabilities

Stockholders’ equity consists of two parts…

• 1.Common stock- investments of assets into the business by stockholders

  2. Retained Earnings- income retained for use in the business

What is ratio in business?

ratio expresses the mathematical relationship between one quantity and another

What is a profitability ratio?

profitability measures the income or operating success of a company for a given period of time

What is EPS (earns per share)

EPS (earns per share) measures the income earned on each share of common stock