Statements
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5
WGU C201 Business Acumen Chapter 15 & 16: Accounting and
1.Balance Sheet: Snapshot - permanent statement, amounts are carried over from
year to year, shows the firm's financial position on a particular date.Close out at end of year.
2.Income Statement: Video - indicates the flow of resources that reveals
perfor- mance over a specific period.Also called a profit and loss statement.
3.Statement of Owners Equity: Shows changes in equity from the year end of
one year to the next.Begins with the amount of owner's equity shown on last statement of owner's equity, add profit to the retained earnings, subtract dividends.Also, shares sold and equity sold. Shares we bought back. Resulting in the ending balance.
4.Statement of Cash Flows: Tracks the flow of cash generated and spent over
a period of time.Including operation activities (day to day operations) Financing activities (obtaining or paying for outside financing) Investing activities (long term assets i.e. building and equipment).Also includes depreciation recorded as a noncash expense.Reducing the value of an asset over time.Public companies are required to prepare these.Provide to creditors and investors with relevant information about cash receipts and cash payments.
5.The only permanent financial statement.: Balance Sheet
6.This statement is used to show cash payment and cash receipts for day to
day operations.: Statement of Cash Flows
7.Information from balance sheet and income statement are used in this
statement to show the change in equity from one year to the next.:
Statement of Owner's Equity
8.Potential buyers are interested in these two financial statements.:
Balance sheet and statement of owners' equity 9.This statement summarizes financial performance in terms of revenues
and costs in a specific time period.: Income Statement
10.Which financial statement do we record depreciation on?: Statement
of Cash Flows Recorded as an expense.
11.Is depreciation a cash or non-cash expense?: Non cash
12.Accrual Accounting: Recognizing revenues and costs when they occur
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WGU C201 Business Acumen Chapter 15 & 16: Accounting and
Statements
Study online at https://quizlet.com/_484pgp
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5 13.Financial Ratios Analyses: Common tool for measuring liquidity, profitability, activity, and reliance on debt financing.
14.Liquidity Ratios: Measure the ability to meet short term obligations.
Increasing this reduces the likelihood that firm will face emergencies caused by the need to raise funds to pay loans.
15.Current Ratio: Liquidity ratio
16.Acid Test (Quick) Ratio: Liquidity ratio
17.Activity Ratios: Measures effectiveness of management's use of firm
re- sources.
18.Inventory Turnover: Activity ratio
19.Receivables Turnover: Activity ratio
20.Total Asset Turnover: Activity ratio
21.Leverage Ratios: What is our mix of owner's equity to debt? Measures
the extent to which a firm relies on debt financing.If it's more than 50%, it means you are relying more on debt than capital.The way to hold onto your leverage is to avoid an over reliance on borrowing.
22.Debt Ratio: Leverage ratio
23.Long Term Debt to Equity: Leverage ratio
24.Which financial ratio is useful for evaluating meeting the short term
oblig- ations?: Liquidity
25.Profitability Ratios: Measures overall performance.
The ability to generate revenue in excess of operating costs.Compare earnings with total sales or investments.
26.Three Profitability Ratios: Gross Profit Margin, Net Profit Margin, Return
on Equity
27.Gross Profit Margin: Profitability ratio
28.Net Profit Margin: Profitability ratio
29.Return on Equity: Profitability ratio
30.Which of the profitability ratios does not include sales in the denomina-
tor?: Return on equity
31.What is in the denominator instead of sales for the return on equity
ratio?: Average equity
32.When we compare liability to assets or long-term debt to equity we are evaluating the leverage of a firm.This is defined as a comparison of
borrowing to: Assets/equity
33.Cash Budget: Tracks the firm's inflow and
outflow. Should be prepared at least monthly.It tells you how much cash you have, how much cash you can lend, and where
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