Keepin' it Balanced
A balance sheet is stated...
a) for the period
b) as of a certain date
b) as of a certain date
Describe the difference between operating and nonoperating income
Operating: Directly related to primary-generating activities of the company
Nonoperating: Not directly related to primary-generating activities but related to the primary profit-generating of that type of business
The statement of cash flows demonstrates a company's cash ________ and cash ________.
Receipts and disbursements
Inflows and outflows
in and out
Each year, companies must provide investors with an ____ _____, which includes financial statements and additional disclosures.
Annual report
10K
Which classmate does this describe:
Sophomore here at Marian, and plays baseball. From Lafayette, Indiana, and a double major in accounting and finance
AJ!
What differentiates a current asset from a noncurrent asset?
Current asset amounts typically will be used or converted to cash within one year; whereas, noncurrent assets are not expected to until beyond one year.
What is the purpose of the income statement?
To demonstrate the company’s profit during a particular period... Did they make money?
There are three major cash flow categories. Name all three and describe 1.
Operating: Result from cash activities reported on the income statement
Investing: Related to purchase and sale of long-lived assets used in operations and investment assets
Financing: When cash is borrowed and paid back to/from creditors or invested and distributed by/to owners
The summary of significant accounting policies lets the reader know valuable information about a company’s choices from among various alternative accounting methods. What might this include?
examples:
LIFO vs FIFO
Historical cost vs FMV
Revenue recognition policies
Which classmates:
"I am from Indianapolis, I live off campus with my parents, after school I work as a cashier at a liquidation store"
"I am a from Brownsburg Indiana and play on the tennis team here at Marian University. I also love to travel around the world and want to finally go to Europe next summer"
Paola!
George!
Why might a company view assuming more debt as a "good thing"?
Assuming more debt can be good for the company as long as it earns a return in excess of the rate charged on the borrowed funds. While there are default risks associated with borrowing, a company can use those borrowed funds to provide greater returns to its shareholders. This is called, "favorable financial leverage"
What is the purpose of earnings per share? Why is it useful?
EPS Relates amount of net income to the number of common shares outstanding. This Helps shareholders scale the company's net income to see what each share owns on an individual basis. This is important because if a company made a ton of net income, but also had a ton of shareholders, the earnings would be diluted between several owners (aka -- they are all splitting the pie)
What is accrual accounting and how does it differ from cash basis?
In accrual accounting, you record revenue when earned and expenses when incurred, regardless of cash movement.
Cash accounting depends only on cash inflows and outflows. It does not take into consideration receivables or payables.
_________ events occur after a company’s fiscal year-end but before the financial statements are issued
Subsequent events
Which classmates?
"I am from a small town called Wheatfield, IN. My hobbies and interests are running, working out, watching sunsets, and spending time with others. I have one older sister that can be crazy at times, but I still love her!"
Is from a city called Berwyn which is a suburb in the Chicago metropolitan area and plays cello!
Hannah!
Nick!
Describe the elements of paid-in capital: common stock and additional paid-in capital
A reconciliation between net income and other comprehensive income must be displayed in the financials in one of two ways:
Tacked on to the end of the income statement, net of tax
or
Separate from the income statement as a statement of comprehensive income
There are two generally accepted methods to report operating activities in the statement of cash flows. What are they?
Direct method
Indirect method
What is management discussion and analysis?
Provides management’s biased but informed perspectives on significant events, trends, and uncertainties pertaining to Operations, Liquidity, Capital resources
Which classmate enjoys working with Cars or fixing some sort of appliance?
and
Which classmate was born and raised in Texas, loves reading, knitting, and music, along with culinary arts?
Steely!
Ambrosia!
1.HELD AT HISTORICAL COST NOT FMV: Many assets are held at their Historical Cost rather than what they could sell them at (FMV)
1.ADDITIONAL VALUE THAT’S NOT REFLECTED: Many aspects of the company that create value are reflected in the stock price, but aren’t reflected in the books
What is the difference between the single-step and multi-step income statements?
Single step: ALL revenues and gains are listed then ALL expenses and losses are listed (other than income taxes), regardless of if they're operating or nonoperating
Multi-step: Separately classifies income statement items by operating and nonoperating. Reports series of intermediate subtotals (such as gross profit, operating income, income before taxes, net income)
Cash received from customers = revenue +/- a decrease in AR
+
Accounts receivable decreases when cash is received. Revenue earned in a prior year may have been recognized on account. Therefore, the cash received in the current year to reduce AR actually relates to prior year net income and should not be included in calculating current year net income.
Auditors examine financial statements and internal controls and provide an ______ on the fairness of the financial statements.
Opinion (auditor's opinion), provided in the auditor's report
Which classmate is the youngest of 5 siblings?
and
Which classmate is a huge Notre Dame fan with a dog named after a ND football coach?
Logan!
Dylan!