Accounting 201 Rephrase in own words
Guam
Acct201.docxIdentify sections of a classified balance sheet. Identify two accounts that fit into each section.
1. A classified balance sheet is further section of assets and liabilities to provide decision makers with more information to help readers quickly grasp the company's financial situation. They are made by two section, first is Assets, and another one is Liabilities and Stockholders equity.
Assets：1. property, plant, and 2. long-term investments.
Liabilities and Stockholders equity：1. current liabilities 2. long-term liabilities.
What is measured by profitability ratios? Give an example of how you compute EPS and discuss how it is used to measure profitability.
2. Measure the income of operating success of a company for a given period of time is measured by profitability ratios. For example: A company’s net income is 20 million, divided by 4 million shares of stock the business has issued and compute its 5 earning per share. The equation to calculate EPS is EPS=(Net Income—Preferred Dividends)/Weighted-average commom shares outstanding.
Define liquidity and solvency. Identify ratios for analyzing a firm’s liquidity and solvency. How are these ratios interpreted?
3. Solvency refers to the ability of a company to fulfill its long-term debt commitments. Liquidity refers to the ability of a company to pay for short-term debt.
The solvency ratio is the ratio of the security of a company's liabilities to the repayment ability of short-term liabilities. Liquidity ratios reflect the short-term solvency of enterprises.
Liquidity ratios interpreted as Current Assets divided by Current Liabilities.
Solvency ratios interpreted as Total Liabilities(both current and long-term) divided by Total Assets.
Use the statement of cash flows to evaluate solvency. Give an example of how to compute free cash flow and describe what it measures.
4. Free cash flow used to measure the cash that the company actually holds and can return to the shareholders
Free Cash Flow= Net Cash Provided by Operating Activities - Capital Expenditures - Cash Dividends
What are generally accepted accounting principles? Name the U.S. and international standard-setting bodies that establish these principles.
5. Generally Accepted Accounting Principles stands for GAAP is a combination of authoritative standards and the commonly accepted ways of recording and reporting accounting information.
