HW & Review

The difference between net income and dividends paid is known as what?

Addition to retained earnings

In what order are the four primary financial statements prepared?

Income statement > Balance sheet > Statement of stockholders' equity > Statement of cash flows

Return on equity can be calculated as ROA × Equity multiplier. What is another way to express this equation?

ROE = ROA × (1 + Debt − Equity Ratio)

Under ________ accounting, revenues are recorded when earned and expenses are recorded with related revenues. Under ________ accounting, revenues are recorded when cash is received and expenses are recorded when cash is paid out. Financial statements are prepared using ________ accounting.

accrual-basis; cash-basis; accrual-basis

A useful way of standardizing financial statements is to choose a _______ year and then express each item relative to that amount.

base

Mortgage lenders probably have the most interest in the ______ ratios.

long-term debt and times interest earned

Gross Profit

net sales - cost of goods sold

Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as _____ ratios.

profitability

The most acceptable method of evaluating the financial statements is to compare the company's current financial:

ratios to the company's historical ratios.

The three parts of the Dupont equation are:

Profit margin, Total asset turnover, & Equity Multiplier.

The ________ retains the power and authority to set accounting standards. Currently, this responsibility has been delegated to the________.

Securities and Exchange Commission; Financial Accounting Standards Board

________ are items owed to a creditor. ________ are items owned by a company. ________ represents owners' claims to company resources.

Liabilities; Assets; Stockholders' equity