{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

(4) Revenue Recognition

(4) Revenue Recognition - Chapter 4 Revenue Recognition...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 4 – Revenue Recognition: When losses occur, it’s important to evaluate both the size and cause of the loss We compare the quality of earnings by comparing the cash flow from operations with the net income o If these two amounts are moving together and if the cash flow amount is larger than the net income, we consider the net earnings to be of high quality Gross Margin = Sales – cost of goods sold Operating activities are the ones that generate the most revenue Operating activities almost always involve cash Cash-To-Cash Cycle: Business operation that involves an outflow of cash followed by an inflow of cash Cash: Initial amount of cash in a company comes from the original investment by the shareholders and from loans Selling Activity: Steps taken to sell the product (advertising, etc…) Delivery of Product: Once the sales contract has been agreed upon the product must be delivered to the customer Collection: Cash or A/R Price Allowance: If the goods get damaged in shipment, the buyer may ask for a price adjustment Warranty Service: Seller is responsible, to some extent, for product replacement or repair during this time If no repair is needed in an extended warranty then the company earns an additional revenue amount Summary of Cash-To-Cash Cycle: If cash inflows are smaller than outflows, the company may be unable to begin a new cycle
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern