ACCT207 Chapter Notes - Chapter 1: Cash Flow Statement, Retained Earnings, Net Income

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limeminnow829

28 Mar 2016

School

University of Delaware

Department

Accounting

Course

ACCT207

Professor

Paretta Robert

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Document Summary

Creditor: lender of money: creditors make money on the loans by charging interest. Creditors are more willing to lend and stock prices usually rise when creditors and investors expect the company to do well in the future (cid:1) Internal decision makers: managers: need information about the company"s business activities to manage the operating, investing, and financing activities of the firm. External decision makers: stockholders and creditors: need the same information as internal decision makers to assess whether the company will be able to pay back its debts with interest and pay dividends. Accounting: system that collects and processes (analyzes, measures, and records) financial information about an organization and reports that information to decision makers: all businesses must have an accounting system. Management (managerial) accounting: accounting information for internal decision makers: requires detailed information because they must plan and manage day-to-day operations of the organization.

Related Questions

1. Creditors' claims on the assets of a company are called: (Points : 2)

2. The primary objective of financial accounting is: (Points : 2)

To serve the decision-making needs of internal users

To provide financial statements to help external users analyze and interpret an organization's activities

To monitor and control company activitiesTo provide information on both the costs and benefits of managing products and services

To know what, when and how muchto produce

3. Assets created by selling goods and services on credit are: (Points : 2)

4. The debt ratio is used: (Points : 2)

To measure the amount of equity relative to the expenses

To reflect the risk associated with a company's debts

Only by banks when a business applies for a loan

To determine how much debt a firm should pay off

5. Net Income: (Points : 2)

Decreases equity

Represents the amount of assets owners put into a business

Equals assets minus liabilities

Is the excess of revenues over expenses

Represents the owners' claims against assets

6. Internal users of accounting information include: (Points : 2)

Shareholders

Customers

Creditors

Government regulators

Line Supervisor

7. Risk is: (Points : 2)

Net income divided by average total assets

The reward for investment

The uncertainty about the expected return that will be earned from an investment

Unrelated to expected return

8. An example of an operating activity is: (Points : 2)

Paying wages

Purchasing office equipment

Borrowing money from a bank

Selling stock

Paying off a loan

9. Which accounting assumption assumes that all accounting information is reported monthly or yearly? (Points : 2)

Business entity assumption

Monetary unit assumption

Value assumption

Cost assumption

Time period assumption

10. Distributions of assets by a business to its stockholders are called: (Points : 2)

QUESTION 1 The knowledge of financial accounting can assist people with decisions such as whether to extend credit to a business. True False 0.2 points Saved QUESTION 2 Employees of a company would not have a reason to use the information provided by financial accounting. True False 0.2 points Saved

QUESTION 3 Financial accounting should be used for assessing the financial health of large organizations only. True False 0.2 points Saved

QUESTION 4 Financial accounting can be helpful for a job candidate who is assessing the financial future of a potential employer. True False 0.2 points Saved QUESTION 5 Lenders might use the information produced by financial accounting when making loan decisions. True False 0.2 points Saved

QUESTION 6 Credit analysts prefer not to use information provided by financial accounting, as it is not accurate. True False 0.2 points Saved

QUESTION 7 Financial accounting is helpful to investment advisors. True False 0.2 points Saved

QUESTION 8 Financial accounting is more useful than managerial accounting. True False 0.2 points Saved

QUESTION 9 The decision to buy or rent equipment is an example of a decision aided by managerial accounting. True False 0.2 points Saved

QUESTION 10 Which of the following statements is true of financial accounting? A. It is used by external parties to make investment decisions. B. It is used to make lease or purchase decisions. C. Managerial accounting is another name for financial accounting, D. It is primarily used to make internal decisions of a business. E. The effectiveness of advertising can be judged using financial accounting. 0.2 points Saved QUESTION 11 The charge for using money over time, often associated with long-term loans, is known as: A. interest. B. principal. C. distribution charge. D. cash dividend. E. preferred dividend. 0.2 points Saved QUESTION 12 Which of the following is a common feature of financial and managerial accounting? A. Both have same objectives B. Both are prepared according to U.S. GAAP C. Both are reported at year end in the annual report D. Both are analyzed by external users while making investment decisions E. Both are used by the management in making decisions 0.2 points Saved

QUESTION 13 Dividends are required to be paid to stockholders on an annual basis. True False 0.2 points Saved

QUESTION 14 An individual who owns one or more shares of stock in a corporation is an owner of that corporation. True False 0.2 points Saved

QUESTION 15 Corporations do not exist as separate legal entities apart from their owners. True False 0.2 points Save Answer

QUESTION 16 It is very difficult to buy or sell ownership shares of a corporation in a stock exchange. True False 0.2 points Saved

QUESTION 17 Stock markets match up investors who wish to buy shares with those who wish to sell them. True False 0.2 points Saved

QUESTION 18 Legal process by which owners of an organization apply to a state government to have it identified as an entity legally separate from its owners is called: A. stocking. B. filling. C. attributing. D. registration. E. incorporation. 0.2 points Saved

QUESTION 19 An advantage of ownership in a sole proprietorship over ownership in a corporation is: A. tax benefits. B. having a board of directors. C. the ability to raise capital through issuance of stock. D. separation of owner and business as legal entities. E. limited liability for debts. 0.2 points Saved

QUESTION 20 Who hires the management of a corporation? A. Stockholders B. Board of directors C. Creditors D. Government E. SEC 0.2 points Saved QUESTION 21 Inventory refers to the: A. excess amount paid for an asset over its fair value. B. intangible assets of a business. C. merchandise bought or manufactured for the purpose of selling. D. amount of net income reinvested by company for future operations. E. revenue generated from investment. 0.2 points Saved QUESTION 22 Investors use financial information to predict whether a: A. company will recruit more employees. B. company's stock price will increase C. company has invested in buildings. D. company will pay salaries. E. company's bond price will increase. 0.2 points Saved

QUESTION 23 Financial accounting can be compared to a portrait. True False 0.2 points Saved

QUESTION 24 Financial statements provide the form and structure for the conveyance of financial information that will create a likeness of the reporting organization. True False 0.2 points Saved

QUESTION 25 The information reported in financial statements must be exact for an investor to make any decision. True False 0.2 points Saved

beigeant306

A.) The textbook seems to favor two techniques for two differentreasons Net present value seems to be the most widely usedtechnique because of its ability to predict the expected dollaramount of wealth that a project should produce. The other widelyused technique is the internal rate of return. Both of thesetechniques can be used to make accept or reject decisions andsometimes IRR is used because of its focus on percentage rates ofreturn as it pertains to the cost of capital of the firm. This wayan analyst can identify any problems with the IRR before theirbosses can implement the project. I am fairly new to this but cansee why a combination of these two techniques could be very usefulto decision makers especially IRR which can show if investmentreturns can exceed a companyâs requirements. Personally my interestis in small business and I enjoyed learning about the paybackperiod. Baby steps.

What are your thoughts regarding this feedback? Pleaseexplain!!!!

B.)The textbook favors the net present valueinvestment valuation technique. The reasoning is that it goes intodeeper detail about the financial standing of a company, than othervaluation methods. It subtracts the value of the initial investmentfrom the firm's cash flows at a rate comparable to the firm's costof capital, as a percentage. It demonstrates more than just thefact that a company can pay back their debts, but whether a companyis profitable or not. An investment firm would be most interestedin an investment that has a greater cash flow than that of theinitial investment. It may seem obvious that someone would want toinvest in a company that makes money, but our textbook has alsoshown us that investments do not always make money at the samepace. For example an investment could break even the first year,but then have accelerated growth year 2 and 3, or vice versa. Thisis a reason why, to me, NPV is a good way to value an investment.It leaves room for this information if you calculate the yearsseparately (unlike you would an annuity).

What are your thoughts regarding this feedback? Pleaseexplain!!!!

indigocicada831

ACCT207 Chapter Notes - Chapter 1: Cash Flow Statement, Retained Earnings, Net Income

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