Chapter 5 & 6
Accounting 201 with Dr. B at Michigan State University
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Receivable Turnover Ratio
Net Sales / Avg. Net A/R
How often a company collects their A/R
A higher number is better
How often a company collects their A/R
A higher number is better
Average Age of Accounts Receivable
Days in Accounting Period (usually 365) / Receivable Turnover Ratio
How long it takes the company to collect their A/R
Lower number is better
How long it takes the company to collect their A/R
Lower number is better
Bad Debt expense as a percentage of sales ratio
Bad Debt Expense / Net Sales
Net Realizable Value
Account Receivable - Allowance for Doubtful Accounts
FOB Shipping Point
Buyer pays for the shipping. Sale is recorded when item is shipped
FOB Destination
Seller pays for shipping. Sales is recorded when item is received
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check that has not cleared, has not been deducted by back yet
Deduct from Bank
Deduct from Bank
Deposits in Transit
shows up on books before bank
Add to Bank
Add to Bank
Bank Service Charges
fees for bounced checks and other items
Deduct from Books
Deduct from Books
Interest Earned
Interest earned on money in the bank
Add to Books
Add to Books
NSF Checks
Non Sufficient Fund Checks
check you deposited that are bounced
Deduct from Books
check you deposited that are bounced
Deduct from Books
Outstanding Checks
Check that hasn't cleared the bank yet
Deduct from Bank
Deduct from Bank
A/R Effect on Statement of Cash Flows
Add: decrease in A/R, increase in unearned revenue
Deduct: increase in A/R, decrease in unearned revenue
Deduct: increase in A/R, decrease in unearned revenue
Internal Controls of Cash
Separation of Duties
separate jobs of receiving cash and disbursing cash
separate procedures of accounting for cash receipts and cash disbursements
separate those that handle cash from those that account cash
separate jobs of receiving cash and disbursing cash
separate procedures of accounting for cash receipts and cash disbursements
separate those that handle cash from those that account cash
Form 10-K Annual Report
The annual report that publicly traded companies must file with the SEC
Form 10-Q Quarterly Report
The quarterly report that publicly traded companies must file with the SEC
It is due 30-40 days after the quarter ends
It is due 30-40 days after the quarter ends
Form 8-K Current Report
is used by publicly traded companies to disclose any material even not previously reported that is important to investors (i.e. auditor changes, mergers, firing of CEO)
Tangible Assets
property, plant and equipment (physical assets expected to be useful for more than one year
natural resources
natural resources
Intangible assets
long life, cant touch, see or feel
(i.e. patent, copyright)
(i.e. patent, copyright)
Working capital
Current Assets - Current Liabilities
Current Ratio
Current Assets / Current Liabilities
Debt-to-Equity
Total Liabilities / Total Stockholders' Equity
Gross Profit Percentage
(Sales - Cost of Goods Sold) / Sales = Gross Profit / Sales
Income from Continuing Operations
What a company usually does in a year, their normal operations
Income tax Expense
Income before tax x Tax Rate
Discontinued operations
Items a company has since stopped
Is placed below continuing operations because it would complicate projections if placed below
Is placed below continuing operations because it would complicate projections if placed below
Extraordinary Items
Earthquake damage
Earnings Per Share
Net Income available to common stock holders / weighted avg # of common stock shares outstanding
Return on Assets
Net Income / Avg. Total Assets
Return on Equity
Net Income / Average Stockholders' Equity
Operating Activities
activities related to the cash inflows and outflows resulting from the normal operations of the firm
Investing Activities
activities related to the cash inflows and outflows from the buying or selling of any long-term assets of the firm (other than its (primary product(s))
Financing Activities
activities related to cash inflows and outflows from the transactions with owners and creditors who supply "funds" to operate the firm and a return to the owners (dividends)
About this deck
About StudyBlue
STUDYBLUE makes things that make you better at school.
Things like online flashcards with photos and audio.
Things like personalized quizzes and friendly reminders about when (and what) to study next.
Think of it as a digital backpack™: access to all of your study materials online and on your phone.
STUDYBLUE exists to make studying efficient and effective for every student, for free. Join us.
“Simply amazing. The flash cards are smooth, there are many different types of studying tools, and there is a great search engine. I praise you on the awesomeness.”
Dennis
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