Current Assets
Assets that companies expect to convert to cash or use up within one year or the operating cycle, whichever is longer cashinvestmentsrecievablesinventoriesprepaid expenses
a company uses the same accounting principles and methods from year to year
Debt to Assets Ratio
one measure of solvencytotal liabilities/total assets
Economic Entity Assumption
states that every economic entity can be separately identified and accounted for
presented in a clear and concise fashion, so that reasonably informed users of that information can interpret it and comprehend its meaning
Public Company Accounting Oversight Board (PCAOB)
determines auditing standards and reviews the performance of auditing firms
the allocation of the cost of an asset to a number of years
Profitability Ratios
Measures of the operating success of a company for a given period of time
Free Cash Flow
describes the net cash provided by operating activities after adjusting for (-)capital expenditures and (-)dividends paid
Generally Accepted Accounting Principles (GAAP)
a set of accounting standards that is used in the preparation of financial statements
Ratio Analysis
expresses the relationship among selected items of financial statement data
Intangible Assets
assets that do not have physical substanceusually valuablegoodwillpatentscopyrightstrademarks
Accumulated Depreciation Account
shows the total amount of depreciation that the company has expensed thus far in the asset's life
Common Stock
investments of assets into the business by the stockholders
Current Ratio
current assets divided by current liabilities
Fair Value Principle
assets and liabilities should be reported at fair value (the price received to sell an asset or settle a liability)
Classified Balance Sheet
A balance sheet that groups together similar assets and similar liabilities, using a number of standard classifications and sections
Historical Cost Principle
dictates that companies record assets at their cost
necessary to be relevant
Cost Constraint
Constraint that weighs the cost that companies will incur to provide the information against the benefit that financial statement users will gain from having the information available
Working Capital
current assets - current liabilities
Retained Earnings
income retained for use in the business
Monetary Unit Assumption
requires that only those things that can be expressed in money are included in the accounting records
Going Concern Assumption
the business will remain in operation for the foreseeable future
Full Disclosure Principle
requires that companies disclose all circumstances and events that would make a difference to financial statement users
intercompany comparisons
based on comparisons with a competitor in the same industry
Intracompany Comparisons
covering two years for the same company
the ability to pay obligations expected to become due within the next year or operating cycle
Earnings Per Share(EPS)
measures the net income earned on each share of common stock
Long-Term Investments
Generally, (1) investments in stocks and bonds of other corporations that companies hold for more than one year; (2) long-term assets, such as land and buildings, not currently being used in the company's operations; and (3) long-term notes receivable.
expresses the mathematical relationship between one quantity and another
industry-average comparisons
based on average ratios for particular industries
Liquidity Ratios
Measures of the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash
Current Liabilities
Obligations that a company expects to pay within the next year or operating cycle, whichever is longer
assets with relatively long useful lives that are currently used in operating the business
The ability of a company to pay interest as it comes due and to repay the balance of debt due at its maturity
Securities and Exchange Commission (SEC)
The agency of the U.S. government that oversees U.S. financial markets and accounting standard-setting bodies
Financial Accounting Standards Board (FASB)
The primary accounting standard-setting body in the United States
results when different companies use the same accounting principles
International Financial Reporting Standards (IFRS)
Accounting standards, issued by the IASB, that have been adopted by many countries outside of the United States
Long-Term Liabilities
obligations that a company expects to pay after one year
International Accounting Standards Board (IASB)
An international accounting standard-setting body responsible for the convergence of accounting standards worldwide
Operating Cycle
the average time required to go from cash to cash in producing revenue
Periodicity Assumption
states that the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared for the business
Solvency Ratios
measure the ability of the company to survive over a long period of time