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OCC ANBE Exam (Master Set) Current Ratio (Liquidity) Whether company is liquid enough to be able to pay its short-term debts. correct answer Current Assets/Current Liabilities Quick Ratio aka Acid Test (Liquidity) A more conservative measure of liquidity. correct answer (cash + ST investments + AR )/Current Liabilities Gross Margin on Sales (Profitability) The excess of a product's selling price over cost, which is what the company has left to coverall remaining expenses and still make a profit. correct answer Gross Margin/Net Sales Profit Margin on Sales (Profitability) The % of net sales that represents profit. correct answer Net Income/Net Sales Return on Assets (Profitability) The amount of income being generated by the company"s assets. correct answer Net Income/Avg Total Assets Return on Equity (Profitability) The amount of income being germinated by the stockholders' investments correct answer Net Income/Avg Stockholders' Equity
Earnings per Share (Profitability) The earnings associated with one share of common stock; the only ratio required by GAAP to be presented with the financial statements. correct answer (Net Income - Preferred Dividends)/Weighted Avg # shares common outstanding Dividend Payout Ratio (Profitability) How much of the company's earnings are distributed to the common stockholders. correct answer Cash Dividends Paid/(Net Income - Preferred Dividends) Price-Earnings Ratio (Profitability) How much the earnings of the company cost an investor correct answer Mkt Price per Share/EPS Day Sales Outstanding (Asset Management) On avg., how long it takes the company to collect its AR from customers. correct answer (AR x 365)/Net Sales Accounts Receivable Turnover (Asset Management) How many times in the period the company collects it AR correct answer Net Sales/Avg. AR Inventory Turnover (Asset Management) On avg., how quickly inventory is sold correct answer CoGS/Avg Inventory
- Statement of Owners' Equity Balance Sheet Components correct answer Assets Liabilities Owners' Equity Income Statement Components correct answer Revenues Expenses Net Income Statement of Cash Flows Components correct answer Operating Activities Investing Activities Financing Activities Current Assets correct answer Cash and Cash Equivalents AR Prepaid Expenses Inventory Marketable Securities Current Liabilities correct answer AP Accrued Liabilities (wages, interest payable, taxes payable, deferred revenues) Long-term Liabilities correct answer Accrued Liabilities Leases (Capital Lease, Operating Lease) Pension Benefit Obligations Contingent Liabilities (must be probable & estimable)
Notes Payable Deferred Taxes Liability Long-term Debt Debits (Left) and Credits (Right) correct answer Debits-increase asset and expense accounts and decrease liability and revenue accounts Credits-increase liability and revenue accounts and decrease asset and expense accounts Relationship between Balance Sheet & Income Statement correct answer Net income from the Income Statement that isn't paid out as a dividend becomes Retained Earnings on the Balance Sheet Time Value of Money (TVM) correct answer Money today is worth more than money in the future due to its potential earning capacity Future Value (FV) correct answer The value of cash at a specified date in the future that is equal in value to a specified sum today Simple- Org investment x (1+(int rt x #yrs)) Compound-Org investment x ((1+int rt)^#yrs) Present Value (PV) correct answer The current worth of a future sum of money given a specified rate of return. Future cash flows are discounted at the discount rate. The higher the discount rate the lower the present value Net Present Value (NPV) correct answer The difference between the PV of cash inflows and the PV of cash outflows. Used in capital budgeting to analyze profitability.
Straight Line Depreciation Expenses Formula correct answer Depreciable Base/Expected Useful Life = Acquisition Cost - Residual Value/Expected Useful Life. Straight Line Depcreciation correct answer spreads depreciation out equally over all periods. Residual Value correct answer how much a fixed asset is worth at the end of its useful life. What are the three distinct areas business activity is divided into on the Statement of Cash Flows? correct answer Operating, Investing, Financing Statement of Cash Flows correct answer reports cash inflows and outflows during an accounting period. Financing Activities correct answer transactions that involve stockholders and creditors, such as receiving common stock investments, paying off loans, and paying dividends. Investing Activities correct answer spending funds on revenue generating assets, such as PPE Operating Activities correct answer cash inflows and outflows from a company's central business, such as receipts from customers and payments to suppliers and employees. Operating Activities Cash Inflow Examples correct answer Cash from customers, cash from interest and dividends, Operating Activities Cash Outflow Examples correct answer Cash Paid to Suppliers, interest paid, other operating cash payments Investing Activities Cash Inflows Examples correct answer Sell PPE, Sell investment securities, recieve loan payments.
Investing Activities Cash Outflows Examples correct answer Purchase PPE, Purchase securities, make loans. Financing Activities Cash Inflows Example correct answer borrow cash from creditors, issue debt securities(bonds), issue equity securities(capital stock). Financing Activities Cash Outflows Example correct answer repay amounts borrowed, repurchase equity shares, pay cash dividends. Capital Expenditures correct answer new land, land improvements, buildings, etc... Free Cash Flows correct answer amount of cash available for business activities after allowances for investing and financing activity requirements to maintain productive capacity at current levels. Free Cash Flow =? correct answer NCOA - (Capital Expenditures + Dividends Paid) Statement of Stockholders Equity correct answer provides information about changes in a company's stockholders equity, including contributed capital and retained earnings. Retained Earnings correct answer Net Income earned by the compay since its incorporation and not yet distributed as dividends. Net Income increases retained earnings and dividends decreases retained earnings. If a company incurs a net loss, it is treated as negative net income, a reduction in Retained Earnings. Certificate of Deposit correct answer a savings ccertificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate and can be issued in any denomination. CDS are generally issued by commercial banks and are insured by the FDIC. Term ranges from 1 month - five years.
IT operations risk correct answer risk that a security breach might occur dealing with either bank operations or cyber security financial analysis correct answer assessment of the viability, stability and profitability of a business interest rate risk correct answer potential for losses arising from changes in interest rate liquidity correct answer being in cash or easily convertible to cash debt paying ability profitability correct answer operating income is greater than adjusted operating expenses asset quality correct answer how immune assets are to reduction in vlaue gap correct answer the spread between lending and borrowing costs spread correct answer the difference between the interest received from lending and the interest paid to depositors captial adequacy correct answer measure of the sufficiency of a firm's funds to meet its business and regulatory obligations financial ratio correct answer a method of evaluating a firm's financial position mortgage payable correct answer Which one of the following is generally not considered a current liability? purchased goodwill correct answer Which one of the following is generally considered an intangible asset?
an expense correct answer Zeta Incorporated paid three months' rent in advance on its new store. At the beginning of the next month, one month's rent must be recorded as: allowance for bad debts correct answer To a bank, the allowance for loan and lease losses account is similar to: depreciation correct answer allocates the cost of an asset over its useful life store display costs correct answer General and administrative expenses on the income statement generally do not include which of the following? revenues minus extraordinary items correct answer Gross profit is calculated as: the total assets and the net income at the end of the year correct answer Which of the following pieces of information do you need to know to calculate the return on assets for the year? contingent liabilities correct answer Possible future claims against a business are: growth in inventory caused by an increase in inventory days on hand correct answer A major reason for business borrowing is: balance sheet correct answer Current liabilities appear on the company's short term debts, accounts payable, accrued liabilities (wages, interest payable, taxes payable, deferred revenues) correct answer Current liabilities on a balance sheet include accretion correct answer Asset growth through addition or expansion. Can occur through internal development or mergers and acquisitions
FV interest compounded annually correct answer Original Investment x ((1+interest rate)^number of years) income statement components correct answer revenues, expenses, net income long term liabilities correct answer leases (capital lease, operating lease), pension benefit obligations, notes payable, deferred taxes liability, long-term debt, loans net present value (npv) correct answer The difference between the PV of cash inflows and the PV of cash outflows. Used in capital budgeting to analyze profitability present value (pv) correct answer The current worth of a future sum of money given a specified rate of return. Future cash flows are discounted at the discount rate. The higher the discount rate the lower the present value relationship between balance sheet & income statement correct answer Net income from the Income Statement that isn't paid out as a dividend becomes Retained Earnings on the Balance Sheet statement of cash flows components correct answer Operating activities, investing activities, financing activities time value of money correct answer Money today is worth more than money in the future due to its potential earning capacity accounts receivable turnover (asset management) correct answer How many times in the period the company collects it AR asset turnover (asset management) correct answer How efficiently the company is using its assets to generate sales
current ratio (liquidity) correct answer Current Assets / Current Liabilities Whether company is liquid enough to be able to pay its short-term debts days sales outstanding (asset management) correct answer On average how long it takes the company to collect its AR from customers days sales of inventory ( asset management) correct answer Using an average rate of sales, how long the company will have inventory until it sells out, assuming no further additions to inventory debt ratio (leverage) correct answer What % of the company's assets are financed by creditors debt to equity ratio (leverage) correct answer How heavily burdened with debt a company is dividend payout ratio (profitability) correct answer How much of the company's earnings are distributed to the common stockholders earnings per share (profitability) correct answer The earnings associated with one share of common stock; the only ratio required by GAAP to be presented with the financial statements gross margin ratio (profitability) correct answer The excess of a product's selling price over cost, which is what the company has left to cover all remaining expenses and still make a profit inventory turnover (asset management) correct answer On average how quickly inventory is sold price/earnings ratio (profitability) correct answer How much the earnings of the company cost an investor
liability correct answer Something for which one is liable; an obligation, responsibility, or debt The financial obligations entered in the balance sheet of a business enterprise assets correct answer A valuable item that is owned by an individual or corporation, that could be converted to cash liquidity correct answer The degree to which an asset can be sold quickly without having to reduce its price very much (or not at all) asset management correct answer Professional management of investments such as stocks and bonds, along with real estate. current liabilities correct answer short term debts, accounts payable, accrued liabilities (wages, interest payable, taxes payable, deferred revenues) leverage correct answer an investor or business using borrowed funds, or debt, in an attempt to increase the returns to equity short term investments correct answer An account in the current assets section of the balance sheet. This account contains any investments that a company has made that will expire within one year. (savings accounts, CD's, money market funds) PV of annuity correct answer an estimation of how much the sum of the annuity's future cash payments are worth today owner's equity correct answer net worth of investor intangible assets correct answer assets that cannot be seen, touch, or physically measured. ex. purchased goodwill
non current assets correct answer Property, plant, equipment, investment property, intangible assets are considered: capital budgeting correct answer The process in which a business decides whether projects such as building a new plant or investing in a long-term venture are worth pursuing. cash flow correct answer is the movement of money into or out of a business.(how it's received & how it's spent) (operating activities) equal correct answer debits and credits must balance ______ capital correct answer The account credited in the entry to record the investment of an asset by the owner net correct answer remember ____ is after taxes certificate of deposit (CD) correct answer A savings account which is paid interest and is penalized if withdrawn prior to an agreed upon maturity date checking account correct answer A bank account that allows you to deposit and withdraw money, make point-of-sale purchases and write checks savings account correct answer An FDIC-insured bank deposit account that earns interest. online banking correct answer A service that allows you to handle most banking activities from your computer via the Internet. Banking activities such as opening accounts, monitoring account activity, transferring funds, paying bills, etc., can be done quickly, easily and safely
bond correct answer is a printed promise to pay a definite amount of money, with interest, at a specific time. When you buy a _____, you lend money to either a corporation or the government. A _____ is a long-term loan dividend correct answer an amount of a company's profits that the company pays to people who own stock in the company general ledger correct answer A ledger that contains all accounts needed to prepare financial statements extraordinary item correct answer are income statement items that are unusual in nature and infrequent in occurrence. Examples include a loss from an earthquake. result from something unforeseen retained earnings correct answer are profits of the business that have not been paid out to the owners but instead reinvested in the core business or used to pay off debt return on assets correct answer Which of the following is considered a profitability measure return correct answer is the amount you earn on your investment mutual funds correct answer are investment companies which pool their money from thousands of shareholders and invest it trial balance correct answer Procedure used to make sure that total debits equal total credits balance correct answer what sheet are the items on: Cash, petty cash, supplies, prepaid insurance, liability accounts, owner's capital, and owner's drawing income correct answer Sales, and all expenses are on the _____ statement
chart of accounts correct answer A list of accounts, by their number, that a business keeps monetary information cost of goods sold correct answer CoGS Which one of the following is generally NOT considered a current liability? a. Interest payable b. Current maturities of long-term debt c. Mortgages payable d. Accounts payable correct answer C- Current maturities of long-term debt. Which one of the following is generally considered an intangible asset? a. Plant, property and equipment b. Purchased goodwill c. Petroleum deposits d. Mineral rights correct answer B- Purchased goodwill Zeta Incorporated paid three months' rent in advance on its new store. At the beginning of the next month, one month's rent must be recorded as: a. A prepaid asset b. A liability c. An expense d. Revenue correct answer C- An expense To a bank, the allowance for loan and lease losses account is similar to: a. Bad debt expense b. Bad debt accretion.
