Ratios
This is the Key profitability ratio. It measures the net income earned on each share of common stock.
What is EPS (Earnings Per Share)?
GAAP generally uses one of two measurement principles. Which is used most commonly?
What is historical cost principle?
States that the business will remain in operation for the foreseeable future
What is going concern assumption?
Used by companies to determine - What type of financial information to disclose? What format to use?How they should measure assets, liabilities, revenues, and expenses?
What is GAAP - Generally Accepted Accounting Principles?
Results when different companies use the same accounting principles.
What is comparability?
The excess of current assets over current liabilities. This can either be stated as positive or negative. If this is positive the company is more likely to pay off it's liabilities.
What is working capital?
Companies record assets at the cost to acquire the asset at the time the asset is purchased using this principle.
What is Historical cost principle?
States that the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared for the business.
What is Periodicity Assumption?
Oversees U.S. financial markets and accounting standard-setting bodies
What is the SEC Securities Exchange Commission?
Means that a company uses the same accounting principles and methods from year to year.
What is Consistency?
This ratio measures the short-term ability to pay maturing obligations and meet unexpected needs for cash.
What is current ratio?
This principle is used only in situations where assets are actively traded.
What is Fair Value Principle?
This assumption requires that only those things that can be expressed in money are included in the accounting records.
What is Monetary Unit Assumption?
Primary accounting standard-setting body in the U.S.
What is Financial Accounting Standards Board (FASB)?
Information must be available to decision-makers before it loses its capacity to influence decisions.
What is Timely?
This ratio measures the percentage of total financing provided by creditors rather than stockholders. It ignores whether the company is performing well or not. Higher ratios imply greater risk that the company may be unable to pay its debts as they come due.
What is debt to assets ratio?
An important item that cannot reasonably be reported in the statements must be discussed in notes that accompany the statements following with what principle?
What is the full disclosure principal?
This assumption requires that company transactions must not blue with personal transactions.
What is Economic Entity Assumption?
Creates international accounting standards (called IFRS). Used by over 115 countries
What is International Accounting Standards Board (IASB)?
Information that independent observers, using the same methods, can obtain similar results.
What is Verifiable?
This ratio provides a useful perspective for stockholders in determining the investment return who usually think in terms of the number of shares they own.
What is EPS (Earnings Per Share)?
These two qualities are used in choosing between historical cost and fair value?
What is relevance and faithful representation?
This assumption relies on a relatively stable monetary unit?
What is Monetary Unit Assumption?
Determines U.S. auditing standards and reviews the performance of auditing firms.
What is Public Company Accounting Oversight Board (PCAOB)?
Information that is presented in a clear and concise fashion so that reasonably informed users of that information can interpret it and comprehend its meaning.
What is Understandability?