Final Exam - 1 Stockholders' equity The owners' claim on...

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1 Stockholders' equity The owners' claim on total assets 2 Components of Stockholder's equity Common Stock and Retained Earnings 3 Management and Discussion Analysis (MD&A) Presents management's views on the company's ability to pay near-term obligations, its ability to fund operations and expansion, and its results of operations - highlights favorable and unfavorable trends and identify significant events 4 Notes to the financial statements Clarify the financial statements and provide additional detail - significant account policies and methods used, explanations of uncertainties and contingencies 5 How are the retained earnings statement and the income statement interrelated? Net income from the income statement transfers to retained earnings - Add net income to the beginning amount of retained earnings to determine ending retained earnings 6 How are the retained earnings statement and the balance sheet interrelated? The ending amount of retained earnings is reported on the balance sheet 7 How are the balance sheet and the statement of cash flows related? The ending amount of cash shown on the statement of cash flows must agree with teh amount of cash on the balance sheet 8 Types of current assets cash, short term investments (short term government securities), receivables, inventories, pre-paid expenses 9 Classified Balance Sheet Groups together similar assets and liabilities, using a number of standard classifications 10 What statement is accumulated depreciation on? The Balance Sheet 11 Depreciation A process of allocating an asset over its total useful life 12 What kind of ratio is Earnings Per Share? Profitability 13 True or False: Comparisons of EPS across companies is meaningful because variations in the number of shares of outstanding stock among companies False
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14 What kind of ratio are working capital and the current ratio? Liquidity ratios 15 What is a weakness of the current ratio? It does not take into consideration the composition of current assets 16 What kind of ratio is debt to total assets ratio? Solvency ratio 17 What does a 54% debt to total assets ratio mean? Every dollar of assets was financed by 54 cents of debt 18 Relevant Information predicts future events, provides feedback, and timely (makes a difference in a business decision) 19 Reliable Information Information that you can depend on - verifiable, faithful representation, and neutral 20 Comparability Ability to compare accounting information of different companies because they use the same accounting principles 21 Consistency A company uses the same accounting principles and methods from year to year 22 When can a company change to a new method of accounting? If it can justify that the new method produces more useful financial informaton 23 Monetary unti assumption Only things that can be expressed in money are included in the accounting records 24 Economic Entity assumption
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Final Exam - 1 Stockholders' equity The owners' claim on...

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