MGMT 30A Chapter Notes - Chapter 2 and 13: International Accounting Standards Board, Financial Accounting Standards Board, Public Company Accounting Oversight Board

51 views5 pages

For unlimited access to Textbook Notes, a Class+ subscription is required.

Chapter 2
Classified balance sheet
Current Assets: assets that a company expects to convert to cash or use up within one year or
its operation cycle, whichever is longer, list in order in which they expect to convert them into
cash
Cash
Investments shot te go’t seuities
Receivables (accounts, notes, and interest)
Inventories
Prepaid expenses (insurance and supplies)
Operating cycle: average time required to go from cash to cash in producing revenue, to
purchase inventory, sell it on account, and collect cash from customers, we will assume that
companies use one year to determine whether an asset or liability is current or long term
unless otherwise stated
Long term investments: investments in stocks and bonds of other corporations that are held
for more than one year, long term assets such as lands or buildings that a company is not
currently using in its operating activities, and long term notes receivables
Property, plant, and equipment: assets with relatively long useful lives that are currently used
in operating the business
Depreciation: allocation of the cost of an asset to a number of years
Accumulated depreciation: total amount of depreciation that the company has expensed thus
fa i the asset’s life
Intangible assets: assets that do not have physical substance and yet often are very valuable
Exclusive right: patents, copyrights, and trademarks or trade name that give company right for
a specified period time
Current liabilities: obligations that the company is to pay within the next year or operating
cycle, whichever is longer
Accounts payable
Salaries and wages payable
Notes payable
Interest payable
Income taxes payable
Long-term liabilities (long-term debt): obligations that a company expects to pay after one year
Bonds payable
Mortgages payable
Long-term notes payable
Lease liabilities
Pension liabilities
Stokholdes’ euit: oo stok ad etaied eaigs
Common stock: investments of assets into the business by stockholders
Retained earnings: income retained for use in the business
Ratio analysis: expressed the relationship among selected items of financial statement data
find more resources at oneclass.com
find more resources at oneclass.com
Unlock document

This preview shows pages 1-2 of the document.
Unlock all 5 pages and 3 million more documents.

Already have an account? Log in
Ratio: the mathematical relationship between one quantity and another
Intracompany companies: covering two years for the same company
Industry-average comparisons: based on average ratios for particular industries
Intercompany comparisons: based on comparisons with a competitor in the same industry
Profitability ratios: measure the income or operating success of a company for a given period of
time, earnings per share
Liquidity ratios: measure short-term ability of the company to pay its maturing obligations and
to meet unexpected needs for cash
Solvency ratios: measure the ability of the company to survive over a long period of time
Earnings per share (EPS): measures the net income earned on each share of common stock
Liquidity: ability to pay obligations expected to become due within the next year or operating
cycle
Working capital: difference between the amounts of current assets and current liabilities
Working capital = current assets current liabilities
Current ratio: liquidity ratio, computed as current assets divided by current liabilities, more
depedale tha okig apital, does’t take ito aout the opositio of the uet
assets
Solvency: ability to pay interest as it comes due to repay the balance of a debt due at its
maturity
Solvency ratio: measure the ability of the company to survive over a long period of time
Debt to assets ratio: one measure of solvency
Net cash: intended to indicate the cash generating capability of the company, fails to take into
account that a company must invest in new property, plant, and equipment just to maintain its
current level of operations
Maintain dividends at current levels: to satisfy investors
Free cash flow: net cash provided by operating activities after adjusting for capital expenditures
and dividends paid
Free cash flow=net cash provided by operating activities capital expenditures cash dividends
Generally accepted accounting principles (GAAP): accounting professionals get guidance from
this set of accounting standards that have authoritative support
Seuities ad Ehage Coissio SEC: age of the US go’t that oesees US fiaial
markets and accounting standard-setting bodies
Financial Accounting Standards Board (FASB): primary accounting standard-setting body in the
US
International Accounting Standards Board (IASB): issues IFRS
International Financial Reporting Standards (IFRS): adopted by many counties outside of the US
Public Company Accounting Oversight Board (PCAOB): determine auditing standards and
review the performance of auditing firms
Enhancing qualities: comparability, verifiability, timeliness, and understandability
Relevance: make a difference in a business decision, predictive value, helps provide accurate
expectations about the future, confirmatory value
Materiality: company-specific aspect of relevance, size makes it likely to influence the decision
of investor or creditor
find more resources at oneclass.com
find more resources at oneclass.com
Unlock document

This preview shows pages 1-2 of the document.
Unlock all 5 pages and 3 million more documents.

Already have an account? Log in

Get access

Grade+
$10 USD/m
Billed $120 USD annually
Homework Help
Class Notes
Textbook Notes
40 Verified Answers
Study Guides
1 Booster Class
Class+
$8 USD/m
Billed $96 USD annually
Homework Help
Class Notes
Textbook Notes
30 Verified Answers
Study Guides
1 Booster Class