Formulas
What is the formula for Asset turnover?
Net Sales/ Average Total Assets
What does a change in Gross Margin mean?
Implies that the relationship between cost and sales is not static
If the lessor records unearned rent at the beginning of a lease term, the lease must:
A) Be a direct financing lease.
B) Be a sales-type lease.
C) Contain a bargain renewal option.
D) Be an operating lease.
D) Be an operating lease
If LIFO method is being used, liquidity is ______
understated
The Cash Method (Basis) of accounting is considered to be in conformity with Generally Accepted Accounting Principles.
true or false
false
What is the formula for receivables turnover?
Net Sales/ Average Accounts Receivable
Cash equivalents are
a. treasury bills, commercial paper, and money market funds purchased with excess cash.
b. investments with original maturities of three months or less.
c. readily convertible into known amounts of cash.
d. all of these.
d. all of these.
When a capital lease is first recorded at the inception of the lease, the lessee typically debits:
A) Leased asset.
B) Rent expense.
C) Lease expense.
D) Lease receivable.
A) Leased asset.
LIFO generally results in a ____ profit
lower
Expense Accounts normally have a debit balance
true or false?
true
What is the formula for Average Collection Period?
365/Receivables Turnover Ratio
What is total asset turnover?
Increasing overtime implies efficiency and effective management of assets. Heavily impacted by the most significant assets on the balance sheet. Measures productivity of a fixed assets investment
The primary purpose of the statement of cash flows is to provide information
a. about the operating, investing, and financing activities of an entity during a period.
b. that is useful in assessing cash flow prospects.
c. about the cash receipts and cash payments of an entity during a period.
d. about the entity's ability to meet its obligations, its ability to pay dividends, and its needs for external financing.
c. about the cash receipts and cash payments of an entity during a period.
Intangible assets generally classified as ____ assets
long term
the lower the rate of return on assets, the better the company or division is utilizing its assets to generate income
true or false
false, (the higher)
What is the formula for Current Ratio?
Current Assets/Current Liabilities
what does Decline in Gross Margin mean?
Implies that price increases are not keeping up with cos increases, or if costs are fixed, sales volume may be declining
When using the indirect method to prepare the operating section of a statement of cash
flows, which of the following is "added" to net income to compute cash provided by/used by operating activities?
a. Increase in accounts receivable.
b. Gain on sale of land.
c. Amortization of patent.
d. All of the above are added to net income to arrive at cash flow from operating
activities.
c. Amortization of patent.
A decreased operating expenses causes net profit margin to ____
increase
Long - term investements are operating assets
true or false
false
What is the formula for Times Interest Earned Ratio?
Net Income + Interest Expense + Income Taxes/ Interest Expense
General rule of thumb
the more times an asset is converted to cash, the better the company is performing.
When using the indirect method to prepare the operating section of a statement of cash
flows, which of the following is "deducted" from net income to compute cash provided
by/used by operating activities?
a. Decrease in accounts receivable.
b. Gain on sale of land.
c. Amortization of patent.
d. All of the above are deducted from net income to arrive at cash flow from operating
activities.
b. Gain on sale of land.
increased cost of sales causes gross profit margin to ____
decrease
return on assets may be calculated by multiplying total asset turnover by profit margin
true or false
true