Financial Accounting – Responsible for recording transactions, measuring, and disclosing.
Management accounting – The process of measurement, accumliation, analysis,
preparation, interpretations, and communication of information that assists managers in
Accounting – Process of recording, organizing, and communicating financial information.
Operating Income = Revenues – operating expenses.
Net Income = Operating profit – taxes and interest.
Return on Assets (%) = (Operating income/Total assets) x 100%
Return on Equity/Investment (%) = (Net income/Shareholder’s equity) x 100%
Representative Faithfulness – None of the information is being left out, no gaps in #s.
8 Accounting Concepts; Accrual – Recording of revenues and expenses in the time
period when the economic flow occurs, rather than when the cash is received or paid,
Business Entity – business is all business in transactions, Historical Cost, Going Concern
– If they’re leaving the marker, everything has an exit price, Periodicity – Business life of
a business/periodic reports of what’s going on at a specific time, Conservatism/Neutrality
– show loss but not increase until increase/unbiased as possible, Recognition – governs
the point at which a transaction has said to happen, Matching – sales revenue realized in a
period to be reported in the same period and not another, Materiality – financial
statements should only have large itemed data, not a 2 dollar coffee, Constant Dollar –
don’t takeAmerican money in a New Zealand business.
CH 3 – Income Statement
1.) Sales (Revenue): ______, ______, ______ - own lines. Everything sold for year in
question + any withdrawed cash (transactions for cash, debit, credit).
Total Revenue = ______
2.) Cost of Sales (COGS): ______, ______, ______ - own lines. Everything that went
into making or production (labour, supplies, etc)
Total Cost of Sales = (______)
3.) Goss Profit/Margin (TTL Rev – TTL COGS) = ______
4.) Expenses (General, Selling,Admin): _____, _____, _____, _____ - own lines.
Variables that depreciate, net Income (amortization, insurance, utilities, rent, wages, NOT
Liabilities/debt orAssets or SE)
Total Expenses = (______)
5.) Net Income (Gross profit/margin – Total expenses) = ______
CH 4-5: Balance Sheet 1.) Assets – Everything company owns
Current Assets: ____, ____, ____, own lines. (Cash, short term investments,
accounts receivables, inventory, retained earnings).
Long-term Assets: ____, ____, ____, own lines. (Amortization of buildings, land,
2.) Liabilities – everything the company owes
Current Liabilities: ____, ____, ____, own lines. (Trade Payables, Short-term
loans/debts, accrued expenses (owing to suppliers),
Long-term Liabilities: ____, ____, ____, own lines. (Mortgage lone, 10 year
Total Liabilities: (_____)
3.) Owners Equity – What is received after total assets – liabilities. ______
To make an operating profit of $___,___ how much sales revenue must be earned
([fixed cost+required profit] / cont margin per desk) x selling price.
Contribution Margin Ratio: Sales Rev-COGS = Gross Margin. Cont Margin/Sales Rev.
To make an operating profit of ___,___ how much revenue (Fixed Cost + Required
Profit) / cont margin ratio.
CH 13 – Sources of Capital
Weighted Average Cost of Capital
• WAAC: (%rate of debt x (1 – rate of tax) x %of debt between debt-equity) +
(%rate of SH/E or E x %of equity between debt/equity). (rd x (1-tr) x %D) +
(rSH/E x %E)
CH 14 – Long Term Decision Making
• 1$ today is not worth 1$ tomorrow.
• Simple Interest: Principle x Interest Rate Per Year
• Fix annum: Principle for year 1 x Interest Rate = Principle Year 2 x Interest Rate..
• Higher rate, higher growth.
• Compound Interest: Looking at the principle at different interest rate and years.