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Accounting
| Question | Answer |
|---|---|
| Direct method | A method of preparing a statement of cash flows that shows operating cash receipts and payments. It is prepared by adjusting each item in the income statement from the accrual basis to the cash basis. |
| Financing activities | Cash flow activities that include (a) obtaining cash from issuing debt and repaying the amounts borrowed and (b) obtaining cash from stockholders, repurchasing shares, and paying dividends. |
| Free Cash Flow | Net cash provided by operating activities adjusted for capital expenditures and cash dividends paid. |
| Indirect Method | A method of preparing a statement of cash flows in which net income is adjusted for items that do not affect cash, to determine net cash provided by operating activities. |
| Investing Activities | Cash flow activities that include (a) purchasing and disposing of investments and property, plant, and equipment using cash and (b) lending money and collecting the loans. |
| Operarting Activities | Cash flow activities that include the cash effects of transactions that generate revenues and expenses and thus enter into the determination of net income. |
| Statement of cash flows | basic financial statement that provides information about the cash receipts, cash payments, and net change in cash during a period, resulting from operating, investing, and financing activities. |
| Bond Indenture | A legal document that sets forth the terms of the bond issue. |
| Bonds | A form of interest‐bearing notes payable issued by corporations, universities, and governmental entities. |
| Callable Bonds | Bonds that are subject to redemption (buy back) at a stated dollar amount prior to maturity at the option of the issuer. |
| Contractual interest rate | Rate used to determine the amount of cash interest the borrower pays and the investor receives. |
| Convertible bonds | Bonds that permit bondholders to convert them into common stock at the bondholders’ option. |
| Debenture Bonds | Bonds issued against the general credit of the borrower. Also called unsecured bonds. |
| Discount (on a bond) | The difference between the face value of a bond and its selling price, when the bond is sold for less than its face value. |
| Effective interest rate | Rate established when bonds are issued that maintains a constant value for interest expense as a percentage of bond carrying value in each interest period. |
| Face Value | Amount of pricipal due at the maturity date of the bond |
| Long term liabilities | obligations expected to be paid more than one year in the future |
| Market Interest Rate | The rate investors demnad for loaning funds to the corporation |
| Maturity Date | The date on which the final payment on the bond is due from the bond issuer to the investor. |
| Mortgage bond | a bond secured by real estate |
| Mortgage notes payable. | A long‐term note secured by a mortgage that pledges title to specific assets as security for a loan. |
| Premium (on a bond) | The difference between the selling price and the face value of a bond, when the bond is sold for more than its face value. |
| Secured Bonds | Bonds that have specific assets of the issuer pledged as a collateral |
| Unsecured Bonds | Bonds issued against the general credit of the borrower. Also called debenture bonds. |
| Change in accounting principle | Use of an accounting principle in the current year that is different from the one used in the preceding year. |
| Comprehensive income | The sum of net income and other conprehensive income items |
| Current Ratio | A measure used to evaluate a company’s liquidity and short‐term debt‐paying ability; calculated as current assets divided by current liabilities. |
| Days in inventory | A measure of the average number of days that inventory is held; computed as inventory turnover divided into 365 days. |
| Debt to assets ratio | A measure of the percentage of total financing provided by creditors; computed as total liabilities divided by total assets. |
| Discontinued operations | The disposal of a significant component of a business. |
| Earning per share | The net income earned by each share of outstanding common stock; computed as net income less preferred dividends divided by the weighted‐average common shares outstanding. |
| Free Cash Flow | A measure of solvency. Cash remaining from operating activities after adjusting for capital expenditures and dividends paid. |
| Gross Profit rate | Gross profit expressed as a percentage of net sales; computed as gross profit divided by net sales. |
| Horizontal Analysis | A technique for evaluating a series of financial statement data over a period of time to determine the increase (decrease) that has taken place, expressed as either a dollar amount or a percentage |
| Liquidity Ratios | Measures of the short‐term ability of the company to pay its maturing current obligations and to meet unexpected needs for cash. |
| Solvency ratios | Measures of the ability of a company to survive over a long period of time, particularly to pay interest as it comes due and to repay the balance of debt at its maturity. |
| Vertical analysis | A technique for evaluating financial statement data that expresses each item in a financial statement as a percentage of a base amount. |
| Equipment was purchased by signing a 3 year note | Non cash |
| Income taxes payable decreased during the period | Operating |
| Inventory decreased during the period | Operating |
| Amoritization for the period was recorded | operating |
| Building is sold for cash | Investing |
| Bonds are converted into common stock | Non cash |
| Prepaid expense increased during the period | OPerating |
| dividends were paind by dereks company during the period | financing |
| Land was purched for cas | investing |
| Common stock was issued for cash | financing |
| Depreciation was recorded for the period | operating |
| Accounts receivables increased during the period | Operating |
Created by:
gbills16