The Balance Sheet and & Financial Disclosures. Ch3

Market Value for a public Corporation

- Market Value= Trading price of a share of a corporation's stock.

Overall Market Value

- Overall Market Value= Share Price x Number of shares outstanding.

Accrued Liabilities

-A past expense that has not been recorded or paid for yet or in the current period. -ie. A seller (business) provides a good or service for us but has not yet sent us an invoice and we haven't paid for it yet.

Current assets include

-Cash and Equivalents -Short-term investments -Accounts receivable - Inventories -Prepaid expenses and other current assets *Short term indicates usually within a year or next operating Cycle.

Company's Book Value

-Is equal to a company's Assets-Liabilities - Doesn't directly measure a company's market value.

What does the Balance Sheet show us?

-It shows us the assets, liabilities, and owners equity of a company at the end of an accounting period. (Assets= Liabilities+Owner's Equity) -Provides useful information about a company's liquidity and Long-term Solvency.

Notes payable

-Original obligation amount+Payment of explicit

Long-term Assets include

-Property, plant, and equipment -Identifiable intangible assets -Goodwill (when a buyer acquires an existing business) -Deferred income taxes and other assets. *Goodwill=Acquisiton price-Fair value

Current Liabilities and what they usually include

-liabilities due within a short time, usually within a year -Current portion of long-term debt -Notes Payable -Accounts payable -Accrued liabilities -Income taxes payable

retained earnings (part of shareholders equity)

-the accumulated lifetime profits a company has earned for its shareholders but has not yet been distributed to those shareholders. -ie. I make 100 dollars profit and give a 20 dollar dividend to shareholders. The 80 dollars I didn't distribute are considered retained earnings.

Liquidity

A company's ability to pay current liabilities

long-term solvency

Ability to pay all current and long-term liabilities.

AOCI (Accumulated Other Comprehensive Income)

Accumulated other comprehensive income (OCI) includes unrealized gains and losses that are reported in the equity section of the balance sheet.

Which of the following statements about the balance sheet are true? -A classified balance sheet to provide useful information about liquidity and long-term solvency. -Liquidity refers to an assessment of whether a company will be able to pay all its liabilities. -Although many valuable resources are not recorded as assets in the balance sheet, these resources are reflected in the company's book value. -The less financial flexibility, the more risk there is that an enterprise will fail.

Answer: -A classified balance sheet to provide useful information about liquidity and long-term solvency. -The less financial flexibility, the more risk there is that an enterprise will fail.

Shareholders' Equity

Assets - Liabilities Includes: -Common Stock -additional paid in capital -retained earnings -accumulated other comprehensive (loss) income or (AOCI)

long-term liabilities

Include: -Long- term debt -Deferred income taxes and other liabilities

As the risk that a company will not be able to pay its debt increases...

Liabilities relative to equity increases.

Solvency

Solvency refers to the financial flexibility a company has. The higher liabilities a company has relative to equity gives them a lower ability to borrow additional funds for investment opportunities that may come up.

Deferred Revenues

When cash is received and goods or services are to be provided in the future. (obligation to the customer)

paid-in capital (part of shareholder equity)

the amount of capital "paid in" by investors during common or preferred stock issuances