Peregrine accounting and finance
Gross Margin Ratio
(Net Sales - Cost of Goods Sold) / Net Sales
depreciation equation
(cost - salvage value) / useful life
What will usually cause the liability account Accounts Payable to increase?
Credit
Which term is associated with "right" or "right side"?
Credit
When a company pays a bill, the account Cash will be __________.
Credited
Entries to revenues accounts such as Service Revenues are usually _________
Credits
What will usually cause an asset account to increase?
Debit
Which term is associated with "left" or "left side"?
Debit
When cash is received, the account Cash will be _________
Debited
Entries to expenses such as Rent Expense are usually _________
Debits
Which financial statement reports the revenues and expenses for a period of time such as year or a month?
Income Statement
Unearned Revenues is what type of account?
Liability (The company that is to perform the service or is to deliver the product has received the cash in advance and therefore has an obligation (liability) to deliver the service or the product.)
Gross margin
Revenue - operating expenses. Does include "overhead" (patent, royalties, accounting salaries, office rent but not capital outlays, depreciation, or taxes)
Under the accrual basis of accounting, revenues are reported in the accounting period when which of the following occurs?
Services or gods have been delivered
Solvency
The ability of a company to pay interest as it comes due and to repay the balance of debt due at its maturity.
What is arbitrage?
The practice of earning a profit by buying a good at a low price and reselling the good at a higher price.
Accounting entries involve a minimum of how many accounts?
Two - because of the double entry system, every transaction will affect at least two accounts
petty cash fund
a cash fund used to pay relatively small amounts
if a country has two income tax brackets with higher tax rates on higher income, a taxpayer earning enough to be taxed in the higher bracket earning $100 additional dollars will pay
a tax rate on the $100 equal to the higher rate
profitability
ability to provide financial rewards sufficient to attract and retain financing
Under the accrual basis of accounting, expenses are reported in the accounting period when which of the following occurs?
an expense matches the revenues or is used up
central bank
an institution designed to oversee the banking system and regulate the quantity of money in the economy
horizontal analysis
analysis of financial statements that compares account values reported on these statements over two or more years to identify changes and trends
Resources owned by a company (such as cash, accounts receivable, vehicles) are reported on the balance sheet and are referred to as _________
assets
the process by which management allocates available investment funds among competing investment proposals is called ____________
capital rationing
Cash does not include:
commercial paper
Assets are usually reported on the balance sheet at which amount?
cost
production budgets are used to prepare ______________ budgets
direct materials purchases, direct labor cost, and factory overhead cost
Discounted cash flow analysis determines value by
finding the present value of all future payments
when interest rates go up, bond prices
for the same time to maturity go down
if a person's home currency goes up in value this will make
foreign currency decrease in relative value
the times interest earning ratio is computed as what
income before tax plus interest expense divided by interest expense
accelerating the collection of receivables will tend to cause the accounts receivable turnover to what?
increase
the primary advantages of the average rate of return method are its ease of computation and the fact that __________
it emphasizes the amount of income earned over the life of the proposal
a bank reconciliation should be prepared periodically because
it is part of effective controls over cash
Obligations (amounts owed) are reported on the balance sheet and are referred to as ________
liabilities
assuming the borrower does not default, corporate bonds have which characteristic
limited liability
lowering interest rates through central bank action is thought to cause
lower unemployment
Revenue minus expenses equals _____.
net income
profit margin equation
net income/net sales
Liabilities often have the word __________ in their account title
payables
an initial public offering of a stock is
primary market transaction
Financial statements
provide information that is useful for making investment and other economic decisions about businesses
profit margin
reasonable expectation of all expenses, accounting net income
in accrual accounting, the effects of business transactions are ____________
recorded when the economic effect occurs
the Sarbanes-Oxley Act of 2002 requires companies and their independent accountants to _______________
report on the effectiveness of the company's internal controls
Vertical analysis
reporting an amount on a financial statement as a percentage of another item on the same financial statement
The first budget customarily prepared as part of an entity's master budget is the
sales budget
the ability of a business to repay its debts and to earn income is referred to as what
solvency and profitability
Assets minus liabilities equals _________
stockholders' equity or owner's equity (net assets if a nonprofit)
What is present value?
the current value of future cash flows discounted at the appropriate discount rate
Liquidity
the ease with which an asset can be converted into cash
Tertiary Market
the industry segment that includes retail businesses such as stores
secondary market
the market in which previously issued securities are traded among investors
residual claimant
the stockholder receives whatever remains after all other claims against the firm's assets have been satisfied
what is cash flow
the total amount of money being transferred into and out of a business
mergers and acquisitions serve an important role in governing American corporations because
they facilitate the replacement of inferior management
Present Value Index
total present value of net cash flow/ amount to be invested
True of false, is annual tax expenses included on a income statement
true
assuming the company does not default on its debt, investments in common stock have what characteristic?
uncertain rewards, ownership rights, limited liability, and residual claimant
If the actual direct labor hours spent producing a commodity differ from the standard hours, the variance is termed
unfavorable
an analysis in which all the components of an income statement are expressed as a percentage of net sales is called
vertical analysis
Cost principle
A principle that states that acquired assets and services should be recorded at their actual cost.
Which financial statement reports the assets, liabilities, and stockholders' (owner's) equity at a specific date?
Balance sheet