Financial Accounting Ratios

Corporation – -most common form of ownership
-ownership of the corporation is divided into shares or stocks
-profits are distributed by dividends
-LIMITED LIABILITY-assets are limited to corporation
equipment account – assets when used and worn down it gradual reports as an expense
unearned revenues – cash received and a liability recorded before services are performed
What are intangibles? – Assets without physical form e.g. research and development expenditure, patents, licences and trademarks, publishing rights and titles, goodwill, brands
Investments – those assets owned by a business but not used in the operation of the business.
adjusted trial balance – After all adjusting entries are journalized and posted the company prepares another trial balance from the ledger accounts
Cash – Coins, currency, checks, and money orders received from others, as well as money deposited in the bank
Creditors are an important group of external stakeholders. They are primarily interested in the ability of the company to generate sufficient cash flow in order to repay the amounts owed. Stockholders are another significant stakeholder in the company. They are primarily interested in the company's ability to effectively raise capital and to invest that capital in projects with a rate of return in excess of the cost of the capital raised, that is, to increase the value of the firm. Regulators such as the SEC and the tax authorities, including the IRS and state and local tax officials, are important constituents that are interested in knowing whether the company is complying with all applicable laws and regulations.

b. Generally Accepted Accounting Principles (GAAP) are the various methods, rules, practices, and other procedures that have evolved over time in response to the need to regulate the preparation of financial statements. They are primarily set by the Financial Accounting Standards Board (FASB), a private sector entity with representatives from companies that issue financial statements, accounting firms that audit those statements, and users of financial information. Other bodies that contribute to GAAP are the AICPA, the EITF, and the SEC.

c. Financial information provides users with information that is useful in assessing the financial performance of companies and, therefore, in setting stock and bond prices. To the extent that these prices are accurate, the costs of the funds that companies raise will accurately reflect their relative efficiency and risk of operations. Companies that can utilize capital more effectively will be able to obtain that capital at a reasonable cost and society's financial resources will be effectively allocated.

d. First, the preparation of financial statements involves an understanding of complex accounting rules and significant assumptions and considerable estimation. Second, GAAP allows for differing accounting treatments for the same transaction. And third, auditors are at a relative information disadvantage vis-à-vis company accountants. As the capital markets place increasing pressures on companies to perform, accountants are often placed in a difficult ethical position to use the flexibility given to them under GAAP in order to bias the financial results or to use their inside information to their advantage. –

Complete – includes all the information necessary
According to Frank Starling’s Law, increasing preload will produce which of the following effects
interest – economic benefit earned by the payee for loaning the principal to the maker
account number – number assigned to an account
Expense – A decrease in owners equity resulting from a business transaction is a/an
recond – zapis, rejestr, protokół
Accоrding tо Frаnk Stаrling’s Lаw, increasing prelоad will produce which of the following effects
What is it called when a company continuously experiences a negative cash flow? And what does it mean? – It is called a continuous negative cash flow. This means that the enterprise is running out of cash and may become insolvent.
Faithful representation – Agreement between a measure and the phenomenon it purports to represent.
Sales invoice – a document that provides support for credit sales
Useful Life – Length of time an asset will be productively used in the operations of a business. Also called service life or limited life.
Maturity Date. – The date on which payment is due on a promissory note.

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