Chapter 9: Liabilities
This term describes a company's obligation to transfer economic benefits or services in the future, typically arising from a past transaction.
What are Liabilities?
This contra-equity account is created when a corporation repurchases its own stock from the market.
What is Treasury Stock?
The Statement of Cash Flows reports cash inflows and outflows across these three primary activities.
What are Operating, Investing, and Financing activities?
In a Vertical Analysis of the Income Statement, each item is expressed as a percentage of this specific line item.
What is Net Sales (or Total Revenue)?
Older Accounts Are ___ to be collected
What is, less likely?
If a bond's stated interest rate is higher than the market interest rate, the bond will sell at this price relative to its face value.
What is a Premium?
Unlike common stockholders, these stockholders usually do not have voting rights, but they have priority when it comes to dividends.
What are Preferred Stockholders?
Purchasing long-term assets like equipment or buildings is classified as a cash outflow in this section.
What is Investing Activities?
This type of analysis compares financial data over time, such as calculating the percentage change in net income from 2022 to 2023.
What is Horizontal Analysis?
For reporting on the Balance Sheet, coins, currency, checks, and balances in savings/checking accounts are all considered this.
What is Cash?
Unlike an interest-only loan, every payment on a fixed installment note includes these two specific components.
What are Interest and a Reduction of Principal?
This amount represents the excess cash received from selling stock over and above the stock's par value
What is Additional Paid-in Capital (APIC)
Under the indirect method for Operating Activities, this non-cash expense is added back to Net Income because it reduced income but didn't use cash.
What is Depreciation (or Amortization)?
This ratio, calculated as Market Price per Share divided by Earnings per Share, is often used by investors to assess company valuation.
What is the Price-Earnings (P/E) Ratio?
In a period of rising costs, this inventory costing method results in the highest Cost of Goods Sold and the lowest Net Income.
What is LIFO (Last-In, First-Out)?
While liquidity ratios measure the ability to pay short-term debt, this category of ratios (such as Debt-to-Equity) measures a company's ability to survive over a long period of time.
What are Solvency Ratios?
One major disadvantage of the corporate form of business is this "double" financial burden, where the corporation pays taxes on income and shareholders pay taxes on dividends.
What is Double Taxation?
The final line of the Statement of Cash Flows (Cash at end of period) must match the cash balance found on this other financial statement.
What is the Balance Sheet?
This liquidity ratio is similar to the Current Ratio but is more conservative because it excludes Inventory from the numerator.
What is the Acid-Test (or Quick) Ratio?
When determining the capitalized cost of equipment, you include the purchase price plus these types of costs necessary to get the asset ready for use.
What are Transportation/Shipping, Installation, and Testing costs? (or "All reasonable and necessary costs")
A company takes out a $100,000 loan at 6% interest on November 1st. This is the exact dollar amount of Interest Expense the company must record for the year ending December 31st.
What is $1,000? ($100,000 × 0.06 × 2/12 months)
If a company begins the year with $50,000 in Retained Earnings, earns a Net Income of $20,000, and pays $5,000 in dividends, this is the ending Retained Earnings balance.
What is $65,000? ($50,000 + $20,000 - $5,000)
If Operating cash flows are +$10,000, Investing are -$4,000, and Financing are +$2,000, this is the Net Increase in Cash.
What is $8,000? ($10,000 - $4,000 + $2,000)
For the "Asset Turnover" ratio, is it generally better to have a higher or lower number?
What is Higher? (It indicates more efficient use of assets to generate sales).
This intangible asset is not amortized.
What is goodwill?