HW & Review
The difference between net income and dividends paid is known as what?
Addition to retained earnings
In what order are the four primary financial statements prepared?
Income statement > Balance sheet > Statement of stockholders' equity > Statement of cash flows
Return on equity can be calculated as ROA × Equity multiplier. What is another way to express this equation?
ROE = ROA × (1 + Debt − Equity Ratio)
Under ________ accounting, revenues are recorded when earned and expenses are recorded with related revenues. Under ________ accounting, revenues are recorded when cash is received and expenses are recorded when cash is paid out. Financial statements are prepared using ________ accounting.
accrual-basis; cash-basis; accrual-basis
A useful way of standardizing financial statements is to choose a _______ year and then express each item relative to that amount.
base
Mortgage lenders probably have the most interest in the ______ ratios.
long-term debt and times interest earned
Gross Profit
net sales - cost of goods sold
Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as _____ ratios.
profitability
The most acceptable method of evaluating the financial statements is to compare the company's current financial:
ratios to the company's historical ratios.
The three parts of the Dupont equation are:
Profit margin, Total asset turnover, & Equity Multiplier.
The ________ retains the power and authority to set accounting standards. Currently, this responsibility has been delegated to the________.
Securities and Exchange Commission; Financial Accounting Standards Board
________ are items owed to a creditor. ________ are items owned by a company. ________ represents owners' claims to company resources.
Liabilities; Assets; Stockholders' equity