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Int. Acct. I
Chapter 4: BS and St. of CF
| Term | Definition |
|---|---|
| balance sheet | (referred as the statement of financial position) reports the assets, liabilities, and stockholders’ equity at a specific date |
| statement of cash flows | reports cash flow from (1) operations, (2) investing transactions, and (3) financing transactions, thereby explaining the net increase or decrease in cash during the period |
| classified balance sheet | grouping assets and liabilities as either current or long-term according to whether the assets or the liabilities will be received or paid within the next year; important relationships are shown |
| liquidity | time it takes to convert a non-cash asset into cash |
| solvency | ability to meet debt obligations as they come due. |
| financial flexibility | Relates to the debt/equity mix in the capital structure |
| assets | probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events |
| liabilities | probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. |
| equity | residual interest in the assets of an entity that remains after deducting its liabilities; the ownership interest |
| right of use (ROU) asset | a lessee's right to use an asset over the duration of the lease |
| current assets | cash and other resources that are expected to be turned into cash, sold, or consumed within a year or the operating cycle, whichever is longer. Items included in the current asset section are presented in order of liquidity |
| operating cycle | the average time between when a company acquires materials and supplies and when it receives cash for sales of the product (for which it acquired the materials and supplies); from cash through inventory, production, receivables, and back to cash |
| cash | currency and demand deposits at a financial institution. Examples of demand deposits are checking, savings, and money market accounts. |
| cash equivalents | short-term, highly liquid investments that will mature within three months or less. One such example is a certificate of deposit (CD) |
| cash equivalents | if a company invests funds into a three-month CD, those funds would be included in the cash and cash equivalents line item on the balance sheet. |
| equity securities | investments in preferred and common stock of other companies. a company can buy the stock and sell it quickly if the stock price increases, or it can hold the stock for many years. |
| equity securities | if the entity intends to sell the stock in a short period of time, say less than a year, it is classified as a short-term investment; generally recorded at fair value |
| debt securities | investments in bonds or notes of other companies or governmental entities; separated into three portfolios : held to maturity, trading, available-for-sale |
| held-to-maturity | debt securities that a company intends to hold until maturity. these are reported as current or noncurrent assets depending on the time left until maturity; held-to-maturity debt investments are reported on the balance sheet at “amortized cost” |
| trading | debt securities bought and held primarily for sale soon to generate a return. These are reported as current assets at their fair value |
| available-for-sale | debt securities not classified as held-to-maturity or trading securities. These are reported at fair value as current or noncurrent assets depending on the length of time management intends to hold the investment |
| non-current assets | those assets not meeting the definition of current assets; being held longer than a year or the operating cycle whichever is longer |
| long-term investments | intent is to hold these investments for an extended period |
| property, plant, and equipment | physical property such as land, buildings, machinery, furniture, tools, right-of-use assets (leased assets), and "wasting resources" (timberland, minerals) used in operations. |
| intangible assets | resources that lack physical substance but provide economic rights and advantages |
| other assets | a special classification for unusual items that cannot be included in one of the other asset categories. |
| current liabilities | obligations that are reasonably expected to be liquidated using current assets or the creation of other current liabilities within one year or operating cycle, whichever is longer |
| working capital | a measure of a firm’s ability to meet its currently maturing obligations (liquidity). |
| working capital (formula) | current assets - current liabilities |
| current ratio | expresses working capital in a manner that is comparable company to company; current assets/current liabilities |
| long-term liabilities | obligations that are reasonably expected to be liquidated at a date beyond one year or one operating cycle, whichever is longer |
| contributed capital | Capital stock + Additional paid-in capital |
| capital stock | total par or stated value of the shares issued; companies must disclose the par value per share and the authorized, issued, and outstanding share amounts for common and preferred stock |
| additional paid-in capital | the excess of amounts paid over the par or stated value |
| retained earnings | the corporation’s accumulated, undistributed earnings |
| unappropriated retained earnings | the amount usually available for dividend distribution |
| restricted retained earnings | the amount restricted by bond indentures or other loan agreements |
| accumulated other comprehensive income | the aggregate amount of the other comprehensive income items, such as unrealized gains and losses on certain investments |
| treasury stock | generally, the cost of shares repurchased by the company. This amount is a reduction of stockholders’ equity. |
| report form | the most common form of the balance sheet, which lists the balance sheet sections one above the other, on the same page |
| operating activities | involve the cash effects of transactions that enter into the determination of net income |
| investing activities | include making and collecting loans and acquiring and disposing of investments (both debt and equity) and property, plant, and equipment |
| internal | investing in itself |
| external | investments in others |
| financing | involve liability and owners' or stockholders equity items. |
| significant noncash activities | all significant financing and investing activities must be disclosed in the statement or notes, even though cash is not affected. |
| free cash flow | defined as operating cash flow less dividends and capital expenditures. Free cash flow determines whether the company can repay creditors or pay dividends or interest to investors |
| current cash debt coverage | indicates whether the company can pay off its current liabilities from its operations each year to assess liquidity; net cash provided by operating activities/average current liabilities |
| cash debt coverage | provides information on financial flexibility. It indicates a company’s ability to repay its liabilities from net cash provided by operating activities, without having to liquidate the assets employed in its operations |
| cash debt coverage (formula) | net cash provided by operating activities/average total liabilities |
| free cash flow | the amount of discretionary cash flow a company has: Net cash provided by operating activities – capital expenditures – cash dividends |
Created by:
ryanriggs18
Popular Accounting sets