SPMT 422 Quiz #5 Liabilities

Current Liabilities

are a company's debts or obligations that are due within one year, appearing on the company's balance sheet and include short term debt, accounts payable, accrued liabilities and other debts.

Total Current Liabilities

are a company's debts or obligations that are due within one year, appearing on the company's balance sheet and include short term debt, accounts payable, accrued liabilities and other debts.

Long-Term Debt

consists of loans and financial obligations lasting over one year. Long-term debt for a company would include any financing or leasing obligations that are to come due in a greater than 12-month period. Long-term debt also applies to governments: nations can also have long-term debt.

Redeemable Preferred Stock

is a class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shares generally have a dividend that must be paid out before dividends to common shareholders, and the shares usually do not carry voting rights.

Deferred Income Taxes

is a liability recorded on the balance sheet that results from a difference in income recognition between tax laws and accounting methods. For this reason, the income tax payable for a company may not equate to the total tax expense reported. The total tax expense for a specific fiscal year may be different than the tax liability owed to the IRS as the company is postponing payment based on accounting rule differences.

Contingencies

is a potential negative event which may occur in the future such as a natural disaster, fraudulent activity or a terrorist attack. In finance, managers often attempt to identify and plan for any contingencies that they feel may occur with any significant likelihood. To mitigate risk, financial managers often err on the conservative side, assuming slightly worse-than-expected outcomes, and arranging a company's affairs so that it can weather negative outcomes with the least distress possible.

Common Stock at stated value

is a security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure; in the event of liquidation, common shareholders have rights to a company's assets only after bondholders, preferred shareholders and other debtholders are paid in full. is a value that, instead of being par value, is assigned to a corporation's stock for accounting purposes. Stated value has no relation to market price.

Comprehensive Income

is a statement of all income and expenses recognized during a specified period. The statement includes revenue, finance costs, tax expenses, discontinued operations, profit share and profit/loss. Most firms report comprehensive income in a separate statement from income resulting from owner changes in equity but have the option of providing information in a single statement.

Income Taxes Payable

is a type of account in the current liabilities section of a company's balance sheet comprised of taxes that must be paid to the government within one year. Income tax payable is calculated according to the prevailing tax law in the company's home country. The taxes are calculated on the company's net income according to its corporate tax rate; if a company is due to receive a tax benefit from its revenue agency, the amount of income tax payable will decrease.

Accounts Payable

is an accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. On many balance sheets, the accounts payable entry appears under the heading current liabilities. Another common usage of AP refers to a business department or division that is responsible for making payments owed by the company to suppliers and other creditors.

Accrued liabilities

is an expense that a business has incurred but has not yet paid. A company can accrue liabilities for any number of obligations, and the accruals can be recorded as either short-term or long-term liabilities on a company's balance sheet. Payroll taxes, including Social Security, Medicare and federal unemployment taxes are liabilities that can be accrued in preparation for payment before the taxes are past due.

Shareholders equity

is equal to a firm's total assets minus its total liabilities and is one of the most common financial metrics employed by analysts to determine the financial health of a company. Shareholders' equity represents the net value of a company, or the amount that would be returned to shareholders if all the company's assets were liquidated and all its debts repaid.

Outstanding Shares

refer to a company's stock currently held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company's officers and insiders. Outstanding shares are shown on a company's balance sheet under the heading "Capital Stock." The number of outstanding shares is used in calculating key metrics such as a company's market capitalization, as well as its earnings per share (EPS) and cash flow per share (CFPS).

Current Portion of long-term debt

refers to the section of a company's balance sheet that records the total amount of long-term debt that must be paid within the current year. For example, if a company owes $100,000 and $20,000 of it is due in the current year, it records $80,000 as long-term debt and $20,000 as CPLTD.