Chapter 5 Balance Sheet - 1. 2. IntermediateAccounting...

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1. General Course Questions 2. Questions before Quiz Chapters 4, 17 & 22 3. Income Statement, Statement of RE and Comprehensive Income (Non-recurring items, Intra period Tax Allocation & EPS) Changes in Accounting Estimates, Error Corrections, Changes in Accounting Principles 4. Review the Balance Sheet using today’s homework 5. Assignments for Thursday, October 21 st : A. Chapter 5 Balance Sheet & Statement of Cash Flows B. Chapter 23 Statement of Cash Flows 6. Return Discussion Questions #3 Earnings Management Intermediate Accounting Intermediate Accounting October  19 October  19 th th , 2010 , 2010     1
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2 Financial Position at a particular point in time IFRS vs. US GAAP IFRS requires presentation of 2 years of balance sheet data US GAAP Public companies, 2 years B/S (SEC) Private companies, only 1 year B/S required Generally listed in order of liquidity Classified as “Current” or “Non-Current”. Chapter 5 Chapter 5 Balance Sheet Balance Sheet
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Current Assets Long-term  investments Property, plant, and equipment Intangible assets Other assets Current liabilities Long-term debt Owners’ equity Capital stock Add’l paid-in cap. Retained earnings Accumulated Other Comp. Income (Treasury Stock) Assets Liabilities and Equity Balance Sheet: Classification Balance Sheet: Classification Question 6, ex 3, Prob. 1 3
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The balance sheet provides information: Evaluating Capital structure – financing by creditors/investors Analyzing an enterprise’s: Liquidity (sufficient resources for day-to-day operations) Current Ratio, Quick Ratio, Working Capital Solvency (ability to pay debts as they mature – more long-run) Lower solvency = higher debt Financial flexibility (ability to respond to threats or take advantage of opportunities) Effectiveness in using assets employed Inventory and Receivables turnover Profitability with rates of return (in combination with the I/S) ROE ROA Balance Sheet: Usefulness Balance Sheet: Usefulness Question 1 & 3 4
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Coverage/ Capital Structure Solvency ratios Degree of protection for long-term creditors and investors Debt to total assets Times interest earned Type What is measured Examples Liquidity ratios Short-term ability to  pay maturing  obligations Current ratio Quick assets ratio Profitability  ratios Degree of success or failure for a given  period Rate of return on assets Return on equity Earnings per share Activity ratios Effectiveness in using  assets employed  Receivables turnover Inventory turnover Total Asset Turnover Types of Ratios Types of Ratios
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Benchmarks: Trends Peers Scaling: Ratios Common size financial statements Limitations: Must compare apples to apples Nature of accounting
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This note was uploaded on 07/25/2011 for the course ACCT 200 taught by Professor Minliu during the Spring '11 term at Universidad Europea de Madrid.

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Chapter 5 Balance Sheet - 1. 2. IntermediateAccounting...

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