Acc 132 Final Exam
net present value
-compares the present value of a project's cash inflows with the present value of its cash outflows. The difference between these two streams of cash flows
negative net present value
-indicates that the project's return is less than the discount rate. -project is not acceptable
Indirect method for operating activities
1. Add depreciation charges to net income. 2. Analyze net changes in non-cash balance sheet accounts. 3. Adjust for gains and losses.
sales on account / average accounts receivable
Accounts receivable turnover
investing activities
Acquiring or disposing of non-current assets -Sale of Property, plant and equipment Any changes on PPE on the balance sheet
preference decisions
Attempt to rank acceptable alternatives from the most to least appealing
financing activities
Borrowing from and repaying principal to creditors and transactions with stockholders -Changes in long term payables/notes Changes in common stock Any dividends
current assets / current liabilities
Current ratio
screening decisions
Pertain to whether or not some proposed investment is acceptable; these decisions come first
operating activities
Revenue and expense transactions that affect net income
Working capital
The excess of current assets over current liabilities
b. A side-by-side comparison of two or more years' financial statements
Which of the following statements describes horizontal analysis? a. A statement that shows items appearing on it in percentage and dollar form. b. A side-by-side comparison of two or more years' financial statements. c. A comparison of the account balances on the current year's financial statements. d. None of the above.
a. Negative financial leverage is when the fixed return to a company's creditors and preferred stockholders is greater than the return on total assets.
Which of the following statements is true? a. Negative financial leverage is when the fixed return to a company's creditors and preferred stockholders is greater than the return on total assets. b. Positive financial leverage is when the fixed return to a company's creditors and preferred stockholders is greater than the return on total assets. c. Financial leverage is the expression of several years' financial data in percentage form in terms of a base year.
post-audit
a follow-up after the project has been completed to see whether or not expected results were actually realized.
total cash + marketable securities + accounts receivable + short term notes / current liabilities
acid test ratio
365 days / accounts receivable turnover
average collection period
365 days / inventory turnover
average sale period
beginning balance + debits - credits = ending balance
basic equation for asset accounts
beginning balance - debits + credits = ending balance
basic equation for contra asset, liability, and stockholder's equity accounts
common stockholder's equity / number of common shares outstanding
book value per share
total liabilities / stockholder's equity
debt-to-equity ratio
dividend per share / earnings per share
dividend payout ratio
dividend per share / market price per share
dividend yield ratio
net income / average number of common shares outstanding
earnings per share
average total assets / average stockholder's equity
equity multiplier
gross margin / sales
gross margin percentage
positive net present value
indicates that the project's return exceeds the discount rate. -project is acceptable
cost of goods sold / average inventory
inventory turnover
net income / sales
net profit margin percentage
average sale period + average collection period
operating cycle
investment required / annual net cash inflow
payback period
market price per share / earnings per share
price earnings ratio
typical cash inflows
reduction of costs, incremental revenues, release of working capital, salvage value
typical cash outflows
repairs and maintenance, working capital, initial investment, incremental operating costs
net income / average stockholder's equity
return on equity
payback period
the length of time that it takes for a project to recoup its initial cost out of the cash receipts that it generates
internal rate of return
the rate of return promised by an investment project over its useful life. It is computed by finding the discount rate that will cause the net present value of a project to be zero
earnings before interest expense and income taxes / interest expense
times interest earned
sales / average total assets
total asset turnover
current year amount / base year amount
trend percentage