BMGT210

book value per share

(stockholder's equity - preferred stock) / outstanding common shares

Net Margin

- net income/net sales - describes the percent remaining of each sales dollar after subtracting other expenses as well as cost of goods sold.

purchasing materials (cash)

- product costs are not expensed until product is sold - transaction affect two assets accounts - cash decreases and inventory increases - no affect on income and total assets

materials, labor, and overhead (resources)

3 types of costs incurred in making a product

Average Collection Period

365/accounts receivable turnover

average days in inventory

365/inventory turnover ratio

opportunity cost

A company is considering eliminating their Small Appliances segment. If the company stops producing small appliances, the space will be used to manufacture laptops. The contribution to profit of the laptop business is a(n) ______________ ______________of operating the small appliance segment

Working capital decreases by $100,000 Working capital = current assets - current liabilities

A company purchased equipment that cost $100,000 by paying $30,000 cash and borrowing $70,000 under a short-term note payable from the bank. What is the impact on the Company's working capital from this transaction?

help managers analyze manufacturing costs

A schedule of cost of goods manufactured and sold is prepared to ______.

A company that has a debt to asset ratio of 90% is using less debt to finance its assets than the average company included in the Dow Jones Industrial Average

All of the following statements about debt to asset ratios are true, except: - The higher a company's debt to asset ratio, the increased risk of the company not being able to pay its debt when debts are due for repayment - A company that has a debt to asset ratio of 90% is using less debt to finance its assets than the average company included in the Dow Jones Industrial Average - The debt to assets ratio indicates the percentage of a company's assets financed by debt - Companies may use a higher debt to asset financing structure to maximize returns to stockholders

expense

All product costs start out as inventory and are ultimately recognized as cost of goods sold which is an _____

Vertical Analysis

An analysis procedure that uses percentages to compare each of the parts of an individual statement to a key dollar amount from the financial statements (typically net sales) is:

decrease

An increase in common stock means a ______ in return on equity

true

Articles of incorporation, prepared by a business that wishes to incorporate, normally include the corporation's name and purpose, its location, and provisions for capital stock, including the types of stock to be authorized, the number of authorized shares, and the par value or stated value per share for each type of stock.

365,000

As of December 31, 2021, Isaac Company had a balance of $200,000 in its common stock account, additional paid-in capital of $100,000, retained earnings of $75,000, and $10,000 of treasury stock. Isaac Company's total amount of stockholders' equity as of December 31, 2021 is:

Accounts Receivable Turnover Ratio = Net Credit Sales / Average Accounts Receivable Accounts Receivable Turnover Ratio = $1,300,000 / $67,000 Accounts Receivable Turnover Ratio = 19.402 Average Days to Collect Accounts Receivable = 365 / Accounts Receivable Turnover Ratio Average Days to Collect Accounts Receivable = 365 / 19.402 Average Days to Collect Accounts Receivable = 18.81 days

As of December 31, 2021, Starwood Corporation has total current assets of $200,000, total current liabilities of $150,000, and accounts receivable of $69,000. As of December 31, 2020, Starwood's accounts receivable balance was $65,000. During the year ended December 31, 2021, Starwood had net sales on account of $1,300,000. What was Starwood's average days to collect accounts receivable during the year ended December 31, 2021?

work in process

As production occurs, materials used, labor and overhead are first accumulated in ______ inventory.

the balance in the common stock account would be $5,000

At the time that Stellar Company issued a 2-for-1 stock split, the company had 1,000 shares of $5 par value common stock outstanding. Stockholders' equity also included $14,000 of additional paid in capital and $20,000 of retained earnings. Immediately after the stock split,

outsourcing

Buying goods and services from other companies rather than producing them internally is commonly called

vertical

Companies that have control over the full range of activities from acquiring raw materials to distributing goods and services are using _______ integration

period

Cost that are expensed as soon as they are incurred are called _______ costs, this also refers to selling, general and administrative costs

downstream costs

Costs incurred after the manufacturing process is complete such as marketing, distribution, and customer service

upstream costs

Costs incurred before the manufacturing process begins such as research and product design

midstream costs

Costs incurred in the process of making products, including direct materials, direct labor and manufacturing overhead

product-level

Costs incurred to support specific goods or services are called ______ costs.

facility

Costs that are not relevant to any specific product, batch or unit of product are called _________- level costs

avoidable

Costs that can be eliminated by making specific choices are called ______ costs

product

Depreciation on manufacturing assets is considered a _____ cost

inventory and cost of goods sold

Depreciation on manufacturing equipment is split between __________

false

Double taxation is a significant disadvantage of the partnership form of business organization

Total manufacturing cost = Direct materials + Direct labor + Manufacturing overhead costs Total manufacturing cost = $30,000 (direct materials) + $50,000 (wages for production workers) + $15,000 (rent payments, utility costs, and depreciation on manufacturing equipment) = $95,000 Number of units produced = Total manufacturing cost / Average cost per unit Number of units produced = $95,000 / $2.50 per unit = 38,000 units

During its first year of operations, Forrest Company paid $30,000 for direct materials and $50,000 in wages for production workers. Rent payments and utility costs for its manufacturing facilities, and depreciation on manufacturing equipment totaled $15,000. General, selling, and administrative expenses were $20,000. The average cost to produce one unit was $2.50. How many units were produced during the period?

number of times interest is earned

Earnings before interest and taxes expense / Interest expense

return on investment percentage

Financial leverage causes a company's return on equity percentage to be higher than its ______.

All of these answers are correct

Financial statement analysis involves forms of comparison including: - Comparing key relationships within the same year. - Comparing changes in the same item over a number of periods - All of these answers are correct - Comparing key items to industry (same line of business) averages

midstream costs to be reported separately from upstream and downstream costs

GAAP requires ______ on public financial statements.

finished goods

Goods are transferred to cost of goods sold from ______ inventory

$20

If a company incurs $4,000 in manufacturing costs to produce 200 units, the average cost per unit is ______.

$80

If a company incurs $8,000 in manufacturing costs to produce 100 units, the average cost per unit is

greater

In general, a lower level of liabilities provides ______ security because the likelihood of bankruptcy is reduced.

work in process raw materials finished goods

Inventory accounts for manufacturers are ______.

4,000

Madison Co. paid dividends of $3,000; $6,000; and $10,000 during the years ended December 31, 2019, 2020 and 2021, respectively. The company had 500 shares of cumulative preferred stock outstanding with a par value of $100 and a 10% Preferred Dividend rate. The amount of dividends paid by Madison to its common stockholders during the year ended December 31, 2021 would be:

Price Earning Ratio (P/E)

Market Price per Share / Earning per Share (EPS)

Solvency Ratios

Measures of a firm's long-term debt-paying ability which includes: - debt to assets ratio - debt to equity ratio - number of times interest is earned ratio - plant assets to long term liabilities ratio

Liquidity Ratios

Measures of short-term debt-paying ability.

22,000 shares

Mitchell Company is authorized to issue 50,000 shares of common stock. The company issued 27,000 shares of stock and later purchased 5,000 shares of treasury stock. The number of outstanding shares of common stock is:

accounts receivable turnover ratio

Net Credit Sales / Average Accounts Receivable

Return on Equity (ROE)

Net Income/Total Stockholder's Equity

The Additional Paid-in Capital account will increase by $350,000.

On January 2, 2020, the Hoover Corporation issued 25,000 shares of $10 par-value common stock for $24 per share. Which of the following statements is true? The Cash account will increase by $500,000. The Retained Earnings account will increase by $600,000. The Additional Paid-in Capital account will increase by $350,000. The Common Stock account will increase by $600,000

only midstream

On public financial statements, ______ costs are classified as product costs and expense when goods are sold.

Net Margin

Operating margin, profit margin and return-on-sales ratio are all terms for ____ ________

buy goods and services from other companies or produce them internally

Outsourcing involves a decision about whether to ______.

decreases operating cash flow increases inventory decreases cash

Paying production workers with cash ______.

inventory immediately

Production wages are recorded as ______ (much like product costs) and salaries to selling and administrative employees are expensed ________.

decreases cash decreases operating cash flow does not affect liabilities increases inventory

Purchasing materials with cash ______.

operating activities on the cash flow statement

Purchasing materials with cash affects ______

increased inventory no change in income statement

Recognizing depreciation on manufacturing equipment results in ______.

period

Selling, general and administrative costs are sometimes called ______ costs because they were

ratio analysis

Studying various relationships between different items reported in a set of financial statements

Book value per share = Total stockholders' equity / Number of common shares outstanding Book value per share = $10,000,000 / 1,000,000 Book value per share = $10 P/E ratio per share = Market price per share / Earnings per share P/E ratio per share = $25 / $5.25 P/E ratio per share = 4.76 $10 and 4.76

Styles Corporation's earnings per share were $5.25 for the year ended December 31, 2021, and $4.00 for the year ended December 31, 2020. As of December 31, 2021 and 2020, Styles Corporation had 1,000,000 common shares issued and outstanding. Styles Corporation did not have any preferred stock issued and outstanding as of December 31, 2021 and 2020. As of December 31, 2021, Styles Corporation's total stockholders' equity was $10,000,000 and its total assets were $15,000,000. As of December 31, 2020, Styles total stockholder's equity was $9,000,000 and its total assets were $13,000,000. The market price per share of Styles Corporation common stock was $25 as of December 31, 2021. The book value per share of Styles Corporation's common stock as of December 31, 2021 is $ __________ and its price-earnings ratio per share as of December 31, 2021 is __________.

percentage change in net sales = [(Net Sales 2021 - Net Sales 2020) / Net Sales 2020] x 100% = [(50,000,000 - 40,000,000) / 40,000,000] x 100% = 25% To determine the trend in gross margin percentages from 2019 to 2021, we need to calculate the gross margin percentage for each year: Gross margin percentage for 2021: $25,000,000 / $50,000,000 = 50% Gross margin percentage for 2020: $24,000,000 / $40,000,000 = 60% Gross margin percentage for 2019: $19,500,000 / $30,000,000 = 65% As we can see, the gross margin percentage has decreased from 65% in 2019 to 50% in 2021. This means that the trend in gross margin percentages from 2019 to 2021 is unfavorable

The Adams Company had net sales as follows: $50,000,000 for the year ended December 31, 2021; $40,000,000 for the year ended December 31, 2020; and $30,000,000 for the year ended December 31, 2019. The Adams Company's gross margins were $25,000,000 for the year ended December 31, 2021; $24,000,000 for the year ended December 31, 2020; and $19,500,000 for the year ended December 31, 2019. Based on this information, the percentage change in net sales for The Adams Company from the year ended December 31, 2020 to the year ended December 31, 2021 was ________%; and the trend in gross margin percentages from 2019 to 2021 is favorable or unfavorable?

Total manufacturing cost = Direct materials + Direct labor + Manufacturing overhead pool costs Total manufacturing cost = $1,000,000 + $2,000,000 + $500,000 Total manufacturing cost = $3,500,000 Manufacturing overhead cost per unit = Total manufacturing overhead pool costs / Total direct labor hours Manufacturing overhead cost per unit = $500,000 / 100,000 Manufacturing overhead cost per unit = $5 Cost of goods sold = Beginning finished goods inventory + Cost of goods manufactured - Ending finished goods inventory Beginning finished goods inventory = $0 (since the company began operations on January 1, 2021) Cost of goods manufactured = Total manufacturing cost / Units produced Cost of goods manufactured = $3,500,000 / 100,000 Cost of goods manufactured = $35 per unit x 75,000 units sold = $2,625,000 Total units produced = 100,000 Units sold = 75,000 Units still available for sale = 100,000 - 75,000 = 25,000 The cost of those 25,000 units still available for sale is: Direct materials = $1,000,000 / 100,000 units produced x 25,000 units still available = $250,000 Direct labor = $2,000,000 / 100,000 units produced x 25,000 units still available = $500,000 Manufacturing overhead cost per unit = $5 (as previously calculated) Manufacturing overhead = $5 x 25,000 units still available = $125,000 Total cost of 25,000 units still available = $250,000 + $500,000 + $125,000 = $875,000

The Coldplay Company began operations on January 1, 2021. During the year ended December 31, 2021, The Coldplay Company started and completed 100,000 units of its only product and sold 75,000 of those units. Each unit of product requires one direct labor hour. The management of Coldplay has determined that manufacturing overhead should be allocated to each unit of product based on direct labor hours. Coldplay incurred the following costs and expenses during the year ended December 31, 2021: raw materials purchased and used of $1,000,000; direct labor of $2,000,000; manufacturing overhead pool costs of $500,000; and selling, general and administrative expenses of $300,000. What was Coldplay's cost of goods sold for the year ended December 31, 2021; and what was Coldplay's finished goods inventory balance as of December 31, 2021?

par or stated value

The Common Stock account on the balance sheet is stated at the ________ of the common stock.

ROA = Net Income / Total Assets ROA = $500,000 / $8,000,000 ROA = 0.0667 or 6.67%

The Oasis Company has the following account balances as of: December 31, 2022 December 31, 2021 Total current assets $2,000,000 $2,500,000 Total assets $8,000,000 $7,000,000 Total current liabilities $1,500,000 $2,000,000 Total stockholders' equity $5,000,000 $4,000,000 The Oasis Company had net income of $500,000 for the year ended December 31, 2022 and $300,000 for the year ended December 31, 2021. What was the Return on Assets for The Oasis Company for the year ended December 31, 2022? 22.22% 5.33% 6.67%

low-ball

The practice of enticing clients with a reduced price and then increasing prices once clients are dependent is called ______ pricing.

expense product costs because services are consumed immediately

The primary difference between how manufacturing and service companies handle product costs is that service companies ______.

the calling company (highest inventory ratio)

Three companies operate in the same line of business and have the following inventory turnover ratios: Springsteen Company 10.0 times Bon Jovi Company 15.0 times The Calling Company 20.5 times Based solely on this inventory turnover ratio, which of these three companies appears to be managing its inventory most efficiently?

Adele Company (closest to the average current ratio)

Three companies who operate in the same industry have the following current ratios as of December 31, 2022: Styles Company .8 Adele Company 1.8 Bon Jovi Company 4.0 The average current ratio for companies who operate in the same industry as these three companies is 1.5. Which of these three companies appears to be managing its working capital most efficiently given the industry in which it operates?

cost of goods manufactured and sold

To help managers analyze manufacturing costs schedule of ________ is prepared

True

True or false: Initially classifying a cost as a product cost, delays but does not eliminate its recognition as an expense.

materiality

Under the concept of ______, generally accepted accounting principles allow companies to expense, rather than capitalize and depreciate, relatively inexpensive long-term assets.

each time a company generates one individual item of product

Unit-level costs are incurred ______.

upstream downstream

When establishing sales prices or measuring profitability, managers may fail to include ______ costs in the decision.

Corporation

Which form of business organization is established as a separate legal entity from its owners? Corporation None of these Sole Proprietorship Partnership

Administrative Marketing Research

Which of the following costs are NOT included in the cost of manufacturing a product?

Financial statement users with expertise in particular industries can look at absolute amounts and assess a company's performance in a certain area. To correctly evaluate an absolute amount, the analyst must consider its relative importance.

Which of the following statements are correct? Multiple select question. Financial statement users with expertise in particular industries can look at absolute amounts and assess a company's performance in a certain area. Using absolute amounts eliminates the problem of varying materiality levels because materiality is the same across all firms and years. To correctly evaluate an absolute amount, the analyst must consider its relative importance.

Authorized shares

Which of the following terms designates the maximum number of shares that a corporation may issue? Authorized shares Outstanding shares Treasury stock Issued shares

profitability

a company's ability to generate earnings, determined by: - Net Margin

Vertical Analysis of Balance Sheet

account balance/total assets

Vertical Analysis of Income Statement

account balance/total sales

Product Costs

all cost related to manufacturing and getting the customer a product (including salaries related to manufacturing)

inventory turnover ratio

cost of goods sold/average inventory

Working Capital

current assets - current liabilities, useful for evaluating a company's liquidity (absolute amount)

Current Ratio

current assets / current liabilities

expense

depreciation on office furniture becomes a depreciation __________

unit level cost + product level cost

formula for avoidable production cost:

expected overhead costs / number of units expected

given expected indirect overhead costs, Calculate a predetermined overhead rate based on the number of units of product expected

Direct Labor

labor cost that can be easily and conveniently traced to products

raw materials

materials used to make products

plant assets to long-term liabilities

net plant assets / long-term liabilities

Stock Market Ratios

ratios are used to assess the performance of a company's stock: Earnings Per Share Book Value per Share Price Earnings Ratio Dividend Yield

Average Accounts Receivable

receivables after subtracting the allowance for doubtful accounts

overhead

resources consumed in the process of making products

Net Credit Sales

sales revenue - discounts - returns and allowances

Manufacturing Overhead (indirect cost)

the following are examples of ________ Rent on manufacturing facilities Indirect materials Indirect labor Depreciation on manufacturing assets Factory utilities

faster

the higher the inventory turnover ratio, the ____ the collection of items, which is good for the company

average cost

the total cost divided by the quantity produced

horizontal analysis

this type of analysis compares items over time periods

vertical analysis

this type of analysis uses percentages to compare individual items on a financial statement to a key figure on the same statement

debt to assets ratio

total liabilities/total assets

Debt to Equity Ratio

total liability/total stockholders equity