ACCT Ch. 10-12

the inventory turnover ratio measures the average

number of times inventory is sold during a period

the statement of cash flows classifies items as

operating, investing, and financing

only ______________ common shares are eligible to receive dividends

outstanding

the number of shares issued less treasury shares repurchased by the corporation

outstanding shares

shareholders' equity is best described as

ownership interests of the shareholders

________________ ratios measure the earnings of operating effectiveness of a company over a period of time

profitability

____________________ and ______________________ are categorized in "other gains and losses" when calculating income from continuing operations

restructuring costs, gains form sale of long-term assets

Price-Earnings ratio (P/E) =

stock price / earnings per share

additional paid-in capital is a _____________ _______ account

stockholders' equity

these financial statements provide useful info that helps financial statement users to forecast a company's cash-generating potential

the income statement and the balance sheet

debt to equity ratio =

total liabilities / total stockholders' equity

the date that stock records are finalized to determine which stockholders are to receive payment

date of record

__________________ and _________________ evaluate a company's ability to pay long-term debts

debt to equity ratio, times interest earned ratio

________________________ and _______________________ are used to evaluate a company's ability to pay long-term debt

debt to equity ratio, times interest earned ratio

retained earnings is recognized as

earned capital

times interest earned =

earnings before interest and taxes / interest expense

______________________ the use of aggressive accounting policies to achieve targeted earnings

earnings management

_____________________ and _______________________ require separate disclosure on the income statement after income from continuing operations

extraordinary items, discontinued operations

number of shares outstanding equals the number of shares __________ minus the number of shares in __________

issued, treasury

______________________ is used to determine if a company can pay its short-term debts

liquidity analysis

asset turnover ratio =

net sales / average total assets

acid-test/quick ratio =

(cash + current investments + accounts receivable) / current liabilities

analyzing trends of financial statement data over time by looking at the year to year change is

horizontal analysis

what method of preparing the statement of cash flows begins with net income?

indirect

an extraordinary item is a material event that is

infrequent in occurrence and unusual in nature

common stock is recognized as

invested capital

in a corporation, shareholders' liability is

limited to the amount of the investment

the current ratio and acid-test ratio are both

liquidity ratios

receivables turnover =

net credit sales / average accounts receivable

return on assets =

net income / average total assets

profit margin ratio =

net income / net sales

cash flow to sales ration measures the

operating cash flows generated for each dollar of sales

amounts earned by the corporation on behalf of the its shareholders

retained earnings

a corporation is owned by its

shareholders

financing activities include cash inflows and outflows that involve

shareholders and creditors

distribution of stock to current shareholders of a corporation are called

stock splits and stock dividends

inventory turnover ratio =

COGS / average inventory

horizontal analysis is also known as __________________ and _______________

time-series analysis, trend analysis

represents a creditor's interest that must be repaid

debt

the date the board of directors officially approves a dividend is the

declaration date

extraordinary items are recorded on the income statement after

discontinued operations

the distribution of a company's accumulated prior earnings is a

dividend

Investors earn a return on stock investments by

receiving dividends and selling the stock for more than its cost

shares of stock that are repurchased are referred to as

treasury stock

a distribution of additional shares of a corporation's stock to current stockholders of the corporation is a

stock dividend

Earnings per share =

(net income-dividends on preferred stock) / average shares of common stock outstanding

gross profit ratio =

(net sales revenue - COGS) / net sales revenue

What is the journal entry for declaring a dividend?

Dividends Dividends Payable

Stockholders' equity consists of

amounts earned by the corporation and amounts invested by the shareholders

the declaration of a dividend results in

an increase in Dividends Declared, an increase in Liabilities, and a decrease in Retained Earnings after temporary accounts are closed

unpaid dividends on cumulative preferred stock are referred to as dividends in __________

arrears

vertical analysis is also commonly known as

common-size analysis

the ________ ___________ used to record a company's repurchase of its own stock is the _____________ stock account

contra account, treasury

the gross profit ratio indicates the portion of each dollar of sales above the

cost of goods sold

When common stock is issued at an amount above par, you ________ additional paid-in capital and you _________ common stock

credit, credit

the date that dividends payable is decreased

payment date

average days in inventory =

365 days / inventory turnover ratio

average collection period =

365 days / receivables turnover ratio

the best measure of a company's profitability is

accrual-based net income

represents an ownership interest in the company

equity

the payment of dividends and changes in the dividends payable account are classified as

financing activities

the asset turnover ratio provides an indication of how efficiently a company uses its assets to

generate revenue