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