Long-Term Debt-Paying Ability
Yes, profitability is important to a firm's long-term, debt- paying ability.
Although the reported income does not agree with cash available in the short
run, eventually the revenue and expense items
Assets - Resources of the firm
Liabilities Debts or obligations of the firm; creditors' interest
Shareholders Equity - Owners' interest in the firm
The balance sheet reports:
the assets, liabilities, gains, and losses for a period of time
the changes in assets, liabilities, and equity for a period of time
the assets, expenses, and liabilities as of a certain d
Statement of Cash Flows
10- 1. The basic justification for a statement of cash flows is that the balance sheet
and the income statement do not adequately indicate changes in cash.
The balance sheet indicates the position of the firm a
Gross profit is the difference between:
net income and operating income
revenues and expenses
sales and cost of goods sold
income from continuing operations and discontinued operations
gross sales and sales disc
At the end of the fiscal year, an adjusting entry is made that increases both interest expense
and interest payable. This entry is an application for which accounting principle?
a. full disclosure
CHAPTER 1INTRODUCTION TO FINANCIAL REPORTING
1. Charging off equipment that cost less than $20 would be an example of the application of:
a. going concern.
Company A uses lifo and Company B uses fifo for inventory valuation. Otherwise, the firms
are of similar size and have the same revenue and expense. Assume inflation. In analyzing liquidity
and profitability of the two firms,
CHAPTER 7LONG-TERM DEBT-PAYING ABILITY
Jones Company has long-term debt of $1,000,000, while Smith Company, Jones' competitor,
has long-term debt of $200,000. Which of the following statements best represents an analysis of the
Statements in which all items are expressed only in relative terms (percentages of a base) are
a. Vertical Statements
b. Horizontal Statements
c. Funds Statements
d. Common-Size Statements
e. none of the answers are co
Personal Financial Statements and Accounting for
Governments and Not-For-Profit Organizations
13- 1. Personal financial statements may be prepared for an individual, a husband and
wife, or a larger family group.
13- 2. The basic perso
Special Industries: Banks, Utilities, Oil and Gas,
Transportation, Insurance, Real Estate Companies
Interest income, service charges, and earnings in investments are the main
sources of revenue for banks.
Loans are asset
Based on the study reported in the text, liquidity and debt ratios are regarded
as the most significant ratios by commercial loan officers.
(a) Debt/equity, current ratio
(b) Debt/equity, current ratio
For the Investor
Earnings per share is the amount of income earned on a share of common
stock during an accounting period.
The Financial Accounting Standards Board suspended the reporting of
earnings per share for nonpublic
Profits can be compared to the sales from which they are the residual. They can
be compared to the assets that generate sales. Or, they can be viewed as return
to the owner. Each measure looks at profits differently
Liquidity of Short-term Assets:
Related Debt-Paying Ability
In the very short run, the procedure of making more funds available by slowing
the rate of payments on accounts payable would work and the firm would have
more funds to
Basics of Analysis
5 - 1.
A ratio is a fraction comparing two numbers. Ratios make the comparisons in
relative, rather than absolute, terms, which helps alleviate the problem of size
5 - 2.
Liquidity is the ability to me
Extraordinary items are events or transactions that are distinguished by their
unusual nature and infrequency of occurrence. They might include casualty
losses or losses from expropriation or prohibition. They mu
Introduction to Financial Statements and Other
Financial Reporting Topics
The responsibility for the preparation and integrity of financial statements
rests with management. The auditor simply examines them f
Introduction to Financial Reporting
The Financial Accounting Standards Board replaced the Accounting Principles
Board as the primary rule-making body for accounting standards. It is an
independent organization and includes