Financial Accounting 5
division, product line
ROA is often computed by ___ or ___
Gross Profit Percentage
measures a company's ability to charge premium prices and produce goods at a low cost
Gross Profit / Net Sales
Gross Profit Percentage is computed using this ratio
managing investments
ROA can be used to evaluate efficiency in ____ at any level within the organization
Net Income / Average Total Assets
Return on Assets = ____
EDGAR
SEC forms are filed through ___, sponsored by SEC
net income
a higher Gross Profit Percentage results in a higher ___
product differentiation
a strategy wherein companies rely on research and product promotion to convince customers of superiority or distinctiveness of products
8-K
auditor changes or mergers would be reported on Form __
SEC
determines the financial statements that public companies must provide to stockholders and measurement rules they must use
conference call
following a press release, during which senior managers answer analysts' questions about quarterly results
1
if a transaction affects the numerator and denominator by the same amount, the effect depends on whether the original ratio was greater, or less than, ___
financial analysts
receive accounting reports from electronic information services and company conversations to combine into reports
fair disclosure
requires that companies provide all investors equal access to all important company news
amortization
similar to depreciation for fixed assets, __ accounts report intangible assets
interest
subjecting a company's statements to independent verification should lower the ___ lenders charge for providing capital
financial reporting, stock exchanges
the SEC oversees __ and __
unexpected earnings
the difference between expected earnings and actual earnings; what the market reacts to
Net Income +/- Adjustments from noncash items = operating cash
the indirect method for reporting Cash Flows from Operating Activities
PCAOB
the private sector body responsible for issuing auditing standards
corporate governance
the procedures designed to ensure that the company is managed in the interests of the shareholders
mutual funds, charitable foundations, pension funds
three examples of institutional investors
press release
written public news announcement normally distributed to major news services
unusual, infrequent
Extraordinary Items are gains or losses that are both ___ and ___
Net Income / Net Sales
Net Profit Margin = ___
Net Sales / Average Total Assets
Total Asset Turnover
Form 8-K
Used by publicly traded companies to disclose any material event not previously reported that is important to investors
XBRL
a language tag used by EDGAR which enables fact retrieval
Sarbanes-Oxley
a law which strengthens US financial reporting and corporate governance regulations
low-cost
a strategy which relies on efficient management of accounts receivable, inventory, and productive assets to produce high asset turnover
information services
allows investors to gather their own information about the company and monitor recommendations
material amounts
amounts large enough to influence a user's decisions
unqualified audit opinion
an auditor's statement that the financial statements are fair presentations in all material respects in conformity with GAAP
venture capitalists
an example of a private investor
goodwill
an intangible asset representing the excess of the price paid for another company over the value of its identifiable assets
forecasts
analysts are regularly evaluated based on the accuracy of their ___
board of directors
elected by stockholders to represent their interests
GAAP
generally one of the first notes addresses which ___ policies the company has adopted
earnings per share
net income / average number of shares outstanding
gross profit
net sales - cost of goods sold
operating income
net sales - cost of goods sold + other operating expenses
intangible assets
no physical existence and a long life; include patents, trademarks, franchises, goodwill
audit committee
part of the board of directors, ensures that processes are in place for maintaining financial integrity
earnings forecasts
predictions of earnings for future accounting periods, prepared by financial analysts
accounting staff
prepare the details of financial reports, with smaller legal responsibility for professional accuracy
causes of differences
preparing the Operating Activities section using the indirect method helps the analyst understand the ___ between net income and cash flows
FASB
private sector body responsible for working out GAAP
cost effectiveness
requires that the benefits of accounting for and reporting information outweigh the costs
pretax earnings
revenues - all expenses except income tax expense
stock market reaction
stock price increases and decreases from investor trading
lenders
suppliers and financial institutions that lend money to companies
Business, Selected Financial Data, Management's Analysis, Financial Statements
the 4 principle components of the financial disclosures of a 10-K
Direct
the ___ method reports the total cash inflow(outflow) from each main type of transaction
Indirect
the ___ method starts with net income and adjusts it by eliminating the effects of transaction that do not involve cash
Form 10-K
the annual report that publicly traded companies must file with the SEC
Return on Assets
the broadest measure of profitability; measures how much the firm earned for each dollar of investment
CEO
the highest company officer, responsible along with management for financial statement information
CFO
the highest officer associated with a company's financial and accounting side
Form 10-Q
the quarterly report that publicly traded companies must file with the SEC
Rules, Additional Detail, Undisclosed Relevant Information
the three components of Footnotes
financial statements, footnotes, Auditor's Opinion
the three components of an annual report produced by a privately held company
incentive, opportunity, ability to rationalize
the three conditions necessary for financial statement fraud to occur
private investors
these individuals purchase shares in companies
banks, suppliers, commercial credit companies
three examples of lenders or creditors
forecasts, recommendations, explanations
three things contained within financial analysts' reports
increasing sales volume, increasing sales price, decreasing expenses
three ways to increase net profit margin
discontinued operations, extraordinary items
two items that companies may also report on their income statements
reducing inventory on hand, consolidating production factories
two ways to increase total asset turnover