Chapter 3

Chapter 3 - Agenda In the news UBS rogue trader Chapter 2 follow up Chapter 2 review questions Chapter 3 Accounting Information System Analyzing

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Unformatted text preview: Agenda In the news : UBS rogue trader Chapter 2 follow up Chapter 2 review questions Chapter 3: Accounting Information System Analyzing and capturing transactions December 31 Amounts in millions 2009 2010 Current assets \$ 146.4 \$ 158.2 Total assets 258.6 284.0 Current liabilities 107.1 119.0 Total liabilities 190.4 201.1 Total common stockholders' equity 68.2 82.9 Net income (loss) (16.5) (74.4) Cash provided (used) by operating activities 15.6 (26.7) Capital expenditures (net) 17.4 22.2 Dividends paid- - Average share of of common stock (millions) 25.2 24.6 1.) Calculate the current ratio for 2009 and 2010 and discuss its relative liquidity position. 2.) Calculate the debt to total assets ratio and free cash flow for 2009 and 2010 and discuss its solvency. 3.) Calculate the earnings per share for 2009 and 2010 and discuss its change in profitability. Answers 1. Current ratio: 1. 2010: \$146.4/107.1 = 1.37 2009: \$158.2/119.0= 1.33 2. Debt to total assets and Free cash flow: . 2010: \$190.4/258.6 =73.6% 2009: \$201.1/284= 70.8% FCF . 2010: \$15.6-17.4-0 = -\$1.8 million . 2009: \$-26.7-22.2-0=-\$48.9 3. Loss per share 1. 2010: -\$16.5/25.2= -\$.65 per share 2. 2009: -\$74.4/24.6= -\$3.02 per share Chapter 3: the accounting information system FALL 2011 BRIAN COPSEY AIS 100 Study Objectives 1. Analyze the effect of business transactions on the basic accounting equation 2. Explain what an account is and how it helps in the recording process 3. Define debits and credits and explain how they are used to record business transactions. 4. Identify the basic steps in the recording process 5. Explain what a journal is and how it helps in the recording process 6. Explain what a ledger is and how it helps in the recording process. 7. Explain what posting is and how it helps in the recording process. 8. Explain the purposes of a trial balance. 9. Classify cash activities as operating, investing, or financing. NOTE: detailed summaries of the responses to these objectives can be found on pp 132-133! General Framework for Viewing Accounting Criteria for Recognition Alternative ways to measure: • Cost • Market value • Replacement cost • Amortized cost Decision Usefulness: • Relevance vs. Reliability • Comparability vs. Consistency • Preciseness of Measure vs. Accuracy vs. Subjectivity Users’ attempting to predict: • Investment Return • Future cash flows • Liquidity • Solvency • Profitability General Key Questions General Key Questions General Key Questions How Does This Chapter Fit the Framework?...
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This note was uploaded on 02/02/2012 for the course ACCT 100 taught by Professor Punke during the Fall '08 term at Wisconsin.

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Chapter 3 - Agenda In the news UBS rogue trader Chapter 2 follow up Chapter 2 review questions Chapter 3 Accounting Information System Analyzing

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