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Accounting Balance Sheet Essay

1190 words - 5 pages

Solving an Ethical Dilemma: 1.Recognize an ethical situation and the ethical issues involved.2.Identify&analyze the principal elements in the situation.3.Identify the alternatives, and weigh the impact of each alternative on various stakeholders. Financing Activities:1.Borrowing money (debt financing)-Amts owed=liabilities.Party to whom amounts are owed are creditors.Notes payable&bonds payable diff. types of liabilities.2.Issuing(selling) shares of stock for cash.-payments to stockholders=dividends.Investing Activities: Comps,deliverytrucks,furniture,buildings,etc.(PPE).Resources owned by a business=assets.Investments another example of an investing activity. Income Stmt: Reports ...view middle of the document...

GAAP more detailed”rules-based”.

The classified BS: shows a point in time. Curr.Assets: company expects to convert to cash or use up w/in one yr or the op. cycle, whichever is longer. Op. Cycle is the average time it takes from the purchase of inventory to the collection of cash from customers. CA Ex: cash, investments, receivables, inventories, prepaid exp. CA listed in order comp. expects to convert them into cash. LT investments: Inv. in stocks or bonds of other corporations that are held for more than one yr. LT Assets like land or buildings that comp. is not currently using in op. activities. LT notes receivable. PPE: long useful life. Currently used in ops. Depreciation-allocating cost of assets to # of yrs. Accumulated dep-total amt of dep. expensed thus far in asset’s life. Intangible assets ex:goodwill, patents…Current Liab: obligations comp. is to pay w/in the next yr or op. cycle, whichever is longer. Ex:accts payable, salaries and wages payable, notes payable, also incl. as curr. liab. are curr. maturites of LT obligations-payments to be made w/in the next yr on LT obligations. LT Liab: obligations comp. expects to pay after 1yr. Ex: bonds payable, mortgages payable, LT notes payable, lease liab. SE: common stock-investments of assets into business by stockholders. Retained earnings-income retained for use in business. Ratio Analysis-expresses relationship among selected items of financial stmt data. Ratio- expresses mathematical relationship between one quantity &another. Single ratio by itself is not meaningful. Prof. ratios: measure income or op. success of comp. for given per. of time. Liquidity ratio: measure ST ability of comp. to pay maturing obligations&meeting unexpected needs for cash. Current Ratio: CA/CL. Solvency ratios: measure ability of comp. to survive over LT. Rev-Exp=Net Income. Earningspershare(EPS) measures net income earned on each share of common stock. EarningsPerShare= NetIncome – Preferred Dividends / Avg. Common Shares Outstanding Liquidity-ability to pay obligations expected to become due w/in next yr or op. cycle. Working capital=CA-CL. Solvency-ability to pay interest as it comes due and to repay balance of debt due at its maturity. Solvency ratios measure ability of comp. to survive over LT. Debt to assets ratio measures% of total financing provided by creditors rather than stockholders. D2A ratio= Total LIab / Total Assets. In StmtofCashFLows, cash provided by op. act. fails to take into acct that comp. must invest in new PPE&must maintain dividends at current levels to satisfy investors. Free cash flow-insight on comp. cash-generating ability. FCF= Cash provided by ops – cap. Expenditures – cash dividends. GAAP-set of rules/practices, has...

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