Chapter 16 & 17 Accounting Test
Operating Activities:
Cash received/paid from day-to-day operations Examples: Inventory, A/R, A/P, Accrued Liabilities, Net Income, Depreciation.
Chapter 16
Chapter 16
Chapter 17
Chapter 17
Describe A/R turnover and days sales in receivables
Measures the number of times the company collects the average receivables balance in a year. The higher the ratio, the faster the cash collections
A/R turnover and days sales in receivables
Net Credit Sales / Average A/R
Earnings per share
Net Income / # of shares
Return on equity,
Net Income / Avg. Equity
Profit margin,
Net Income / Net Sales
Purchase of equipment in exchange for notes payable
Non-cash
Mountain Water Corp. issued common stock of $28,000 to pay of long-term notes payable of $28,000. In what sections would these transactions be recorded ?
Non-cash investing and financing activities, $28,000
Retired a notes payable with 1,250 shares of the company's common stock.
Non-cash investing and financing activity
Cash payment for salaries
Operating
Cash paid to vendors, $17,000.
Operating activity
Cash received from sales to customers of $35,000.
Operating activity
Describe Earnings per share
Reports the amount of net income (loss) for each share of the company's outstanding common stock.
Are Revenue and cash the same?
Revenue and cash aren't the same. Revenue could have come from A/R
Describe profit margin
Shows how much net income a business earns on every $1 of sales.
Describe price to earnings ratio
Shows the market price of $1 of earnings.
Describe Debt to assets,
Shows the proportion of assets financed with debt. The higher the debt ratio, the higher the risk.
Describe return on equity
Shows the relationship between net income available to common stockholder and their average common equity invested in the company.
Price to earnings ratio.
Stock Price per share / Earnings per share
Describe Quick ratio
Tells us whether a company can pay all its current liabilities if they came due immediately.
Describe current ratio
The current ratio measures a company's ability to pay its current liabilities with its current assets.
Debt to assets,
Total liabilities / Total assets
Is it possible to have Revenue without receiving any cash?
Yes
Investing Activities:
Cash received/paid from buying/selling assets Examples: Plant Assets, Land
Salem Nursery earned net income of $71,000 after deducting depreciation of $3,000 and all other expenses. Current assets decreased by $2,000, and current liabilities increased by $7,000. How much was Salem Nursery's cash provided by operating activities (indirect method)?
$83,000
days sales in inventory
365 / Inventory turnover
Cash flow statement heading
Business name Statement of Cash flows Year ended December 31, 2017
Inventory turnover
COGS / Avg Inventory
Quick ratio
Cash + A/R + Investment / Current Liabilities
Financing Activities:
Cash received/paid from borrowing $ or issuing stock. Examples: Common Stock, Notes Payable, Dividends
Current Ratio
Current Assets/Current Liabilities
Cash receipt from the issuance of common stock
Financing
Issued $14 par preferred stock for cash.
Financing Activity
Purchased treasury stock for $28,000
Financing activity
Identify each item as operating, investing, financing, or non-cash
Identify each item as operating, investing, financing, or non-cash
Identify the category of the statement of cash flows in which each transaction would be reported.
Identify the category of the statement of cash flows in which each transaction would be reported.
Cash receipt from the collection of long-term notes receivable
Investing
Cash receipt from the sale of equipment
Investing
Purchased equipment for $130,000 cash.
Investing Activity
Sold building for $19,000 gain for cash
Investing activity and operating activity
Describe days sales in inventory,
Measures the average number of days merchandise inventory is held by the company.
Describe Inventory turnover
Measures the number of times a company sells its average level of merchandise inventory during a year.
Operating activities are most closely related to ____________________
current assets and current liabilities
