One of the main financial statements (along with the balance sheet, the statement of cash flows, and the statement of stockholders’ equity). The income statement is also referred to as the profit and loss...
One of the main financial statements (along with the balance sheet, the statement of cash flows, and the statement of stockholders’ equity). The income statement is also referred to as the profit and loss...
will have no profit. Example of Margin of Safety Let’s assume that a company currently sells 3,000 units of its only product. The company has estimated that its break-even point is 2,800 units. Therefore, the...
What are the reasons for high inventory days? Definition of Inventory Days I assume that inventory days is referring to the days’ sales in inventory. If so, then inventory days is also related to the inventory turnover...
amount of working capital is solvent. This is a short run view since the focus is on the company’s current assets and its current liabilities. Others look at a company’s total assets and total liabilities or the...
working capital and the current ratio. Examples of Current Assets Examples of current assets and the typical order of liquidity include: Cash and cash equivalents (which includes currency, checking accounts, petty cash,...
of its current liabilities in the calculation of the company’s quick ratio. Examples of Quick Assets Common examples of quick assets include: Cash and cash equivalents Temporary marketable securities Accounts...
Where can I find financial ratios for my industry? One source for financial ratios by industry is the RMA Annual Statement Studies Financial Ratio Benchmarks. RMA is the acronym for Risk Management Association and...
assets in order to determine a company’s working capital. (Dividing current assets by the current liabilities is the company’s current ratio.) Examples of Current Liabilities The following are common examples of...
receivable turnover ratio. average collection period (or) days' sales in accounts receivable This metric results when 365 or 360 days is divided by the accounts receivable turnover ratio. Mark as wrong Mark as...
plan, a deferred profit sharing plan, and/or a charitable giving plan may require an expense of 25% of its pretax profits. In addition, a U.S. corporation might have a combined federal and state income tax rate of...
in order to replace the units sold. The use of historical costs during periods of increasing prices means that companies with large amounts of plant assets and inventory will be reporting net income that is greater than...
Weekly Income Statement When I became a director of a meatpacking company, I was concerned about the thin profit margins, the corporation’s lack of working capital, and my inexperience in the industry. The company...
, work-in-process, finished goods) and the cost of goods sold will contain the standard costs. (Think of the standard costs as the “should be” costs which are tied to the amounts in the company’s profit plan.) Any...
statement’s heading indicates a period of time (or time interval) such as the year ending December 31? Select... Balance sheet Income statement 3. Total revenues minus total expenses is __________. Select... gross...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
. Net sales minus the cost of goods sold is the amount of a retailer’s __________ profit. 19. An aging of accounts __________ will be helpful in determining the correct balance for the account Allowance for Doubtful...
of cash ______________. 23. Gross profit is net __________ minus the cost of goods sold. 24. The cost of goods sold can be computed as __________ __________ plus net purchases minus ending inventory. 25. A company has a...
materials, it concludes that LIFO will better indicate the company’s true profit. In the year of the change from FIFO to LIFO (and in years when comparisons are presented), the company must disclose the break in...
. The combination of all the budgets is referred to as the company’s master budget or profit plan. Budgets help management decide which activities it will undertake and how the company’s resources will be used. If...
What is ROI? Definition of ROI ROI is the acronym for return on investment. Traditionally, ROI related 1) the income statement profit to the 2) the balance sheet investment. A drawback of ROI is that the accounting...
a company’s costs, assisting in financial decisions, profit planning, calculating break-even points, capital budgeting, and calculating the costs of existing products in order to value the company’s inventory and to...
: Public accounting as a sole practitioner or as a member of small to international CPA firms working as an auditor, tax consultant, general consultant, etc. Manufacturing companies, service businesses, etc. working as...
existing equipment Purchasing delivery vehicles Constructing additions to buildings Examples of Capital Budgeting Calculations Capital budgeting usually involves the following calculations for each project: Future...
the heading income statements. Seasoned business owners often refer to this financial statement as the P&L, which is short for profit and loss statement. The word statements (instead of statement) is used in the...
What is the statement of activities? Definition of Statement of Activities The statement of activities is one of the main financial statements issued by a nonprofit organization. It is prepared instead of the income...
for income tax and before investment income, interest expense, or other non-operating income or expense items. Operating income is also reported as income from operations, operating earnings, or operating profit. Major...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
and damages during shipping. Select... buyer seller 17. A report that sorts a company’s accounts receivable according to the dates appearing on the unpaid sales invoices is the __________ of accounts receivable. 18....
is driven by the __________ budget. 3. A company’s profit plan or __________ budget includes all of the operating and financial budgets. 4. A budget that will increase when volume increases is referred to as a...
and Allowances for $500 and will credit Accounts Receivable for $500. Company K’s income statement will report the gross Sales of $100,000 minus the sales returns and allowances of $500 and the resulting net sales of...
or to the proprietor’s capital account at the end of each accounting year.) Contra-revenue accounts including Sales Discounts, Sales Returns, etc. (The debit balances in these accounts allow for the reporting of both...
pay rate is $20.50 which means the employee’s gross vacation pay will be $2,460 (120 hours X $20.50). The June 1 journal entry to record the vacation payment is: Debit Vacation Payable $2,400 (to eliminate the...
Employees’ Wages Not Matched by Employer Examples of payroll taxes which are withheld from an employee’s gross wages and then remitted to the government agency by the employer include: Federal income taxes State and...
that salaried employees having a gross salary of less than $455 per week for a 40-hour work week must receive overtime pay when working more than the normal 40 hours. In addition to the U.S. Department of Labor’s Fair...
What is payroll accounting? Definition of Payroll Accounting Payroll accounting involves a company’s recording of its employees’ compensation including: gross wages, salaries, bonuses, commissions, and so on that...
of goods sold. The cost of goods sold is an expense that is matched with the sales reported on the income statement. With inflation (costs increasing), the recent higher costs will be the first costs reported as the...
and distribute to its stockholders, the following corporation information should be considered: Present cash balance Cash needed to finance the business operations (growth, inflation, etc.) Cash needed to finance future...
-term assets. Similarly, current liabilities are reported in a section that is separate from long-term liabilities. This allows bankers, owners, and others to easily compute the amount of an organization’s working...
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