What is the working capital turnover ratio? Definition of Working Capital Turnover Ratio The working capital turnover ratio is also referred to as net sales to working capital. It indicates a company’s effectiveness in...
What is the working capital turnover ratio? Definition of Working Capital Turnover Ratio The working capital turnover ratio is also referred to as net sales to working capital. It indicates a company’s effectiveness in...
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...
Why isn't land depreciated? Definition of Land The land that is used in a business (as opposed to land that is an investment, or land that will be sold by a real estate developer) is a tangible asset that is assumed to...
What is a financial statement? Definition of Financial Statement Generally, the term financial statement could be referring to: General-purpose, external financial reports that are distributed by a company to people...
Is the cost of land, buildings, and machinery a fixed cost? Land, Buildings and Machinery are Fixed Assets It is common for people to refer to land, buildings, and machinery as fixed assets. They are also referred to as...
What is a liquidity ratio? Definition of Liquidity Ratio A liquidity ratio is a financial ratio that indicates whether a company’s current assets will be sufficient to meet the company’s obligations when they become...
What is EBIT? EBIT is the acronym for earnings before interest and taxes. In other words, EBIT is a corporation’s net income assuming it had no interest expense and no income tax expense. (Since the amount of earnings...
Can a fully depreciated asset be revalued? A fully depreciated asset cannot be revalued because of accounting’s cost principle. Definition of a Fully Depreciated Asset A fully depreciated asset is one that has...
Can a cost be both a direct cost and an indirect cost? A cost can be both a direct cost and an indirect cost. One of many examples is the cost of a supervisor in a department within a factory. Let’s assume that Sam...
Which items on a bank reconciliation will require a journal entry? Journal Entries for Bank Reconciliation The items on the bank reconciliation that require a journal entry are the items noted as adjustments to books....
What is a liability? Definition of Liability A liability is an obligation arising from a past business event. It is reported on a company’s balance sheet. Liabilities are also part of the basic accounting equation:...
Where can I find a sample of a cash flow statement? A cash flow statement or statement of cash flows should be presented with a U.S. corporation’s annual financial statements. If a corporation’s stock is publicly...
Can I take the CPA Exam with a bachelor's degree? To be eligible for taking the CPA Exam you must meet the requirements of the board of accountancy in the U.S. state (or jurisdiction) in which you plan to take the CPA...
Where can I get official information for federal payroll taxes? For official information on federal payroll taxes we recommend the Internal Revenue Service Publication 15 which is known by two names: Circular E and...
What is the margin of safety? Definition of Margin of Safety In break-even analysis, the term margin of safety indicates the amount of sales that are above the break-even point. In other words, the margin of safety...
Operations of an entire division, subsidiary, or segment of a company where a formal plan exists to eliminate it from the company. (It involves more than pruning a product line of certain models of products.) The...
Income Statement (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (37) Marked Wrong (0) Marked Right (0) income statement (or) statement of earnings (or) statement of operations This financial...
Financial Ratios Financial Ratios Including Limitations Financial ratios are one component of financial analysis. Financial ratios are often calculated by using amounts from previously issued annual financial statements....
What causes an increase in break-even point? Definition of Break-even Point The break-even point is the sales volume or sales revenue that is needed to cover the company’s expenses. In other words, it is the point...
What is the current ratio? Definition of Current Ratio The current ratio is a financial ratio that shows the proportion of a company’s current assets to its current liabilities. The current ratio is often classified as...
What is the difference between inventory and the cost of goods sold? Definition of Inventory Inventory for a retailer or distributor is the merchandise that was purchased and has not yet been sold to customers. A...
What is the employee's Social Security tax rate for 2022 and 2023? Social Security Payroll Tax for 2022 The employee’s Social Security payroll tax rate for 2022 (January 1 through December 31, 2022) is 6.2% of the...
What is the net book value of a noncurrent asset? The net book value of a noncurrent asset is the net amount reported on the balance sheet for a long-term asset. To illustrate net book value, let’s assume that several...
What is sales mix? Definition of Sales Mix Sales mix is the relative proportion or ratio of a business’s products that are sold. Sales mix is important because a company’s products usually have different degrees of...
What is capex? Definition of Capex Capex is a shortened form of the term capital expenditure or capital expenditures. Capex is often used when referring one or both of the following: Actual amounts that were spent during...
What is inventory? Definition of Inventory Inventory is a very significant current asset for retailers, distributors, and manufacturers. Inventory serves as a buffer between 1) a company’s sales of goods, and 2) its...
Why is there a large difference between share value and stockholders' equity? There can be many reasons why the market value of a corporation’s stock is much greater than the amount of stockholders’ equity reported...
Why are bonds payable less costly than common stock? Bonds payable are less costly than common stock because the bonds issued by a corporation contain a formal contract to pay the investor a fixed amount of interest...
What is the free cash flow ratio? Definition of Free Cash Flow Free cash flow for a year is an amount (as opposed to a ratio or percentage) usually defined as: net cash provided by operating activities for the year minus...
What is accrued interest? Definition of Accrued Interest Accrued interest is the amount of loan interest that has already occurred, but has not yet been paid by the borrower and not yet received by the lender. Under the...
What is the effective interest rate for a bond? Definition of Effective Interest Rate of a Bond The effective interest rate of a bond is usually the market interest rate and the bond’s yield-to-maturity (as opposed to...
Does the income statement explain the change in the equity section of a balance sheet? The income statement could explain the change in the equity section of a balance sheet. However, there are likely to be some other...
What is contribution margin? Definition of Contribution Margin In accounting, contribution margin is defined as: revenues minus variable expenses. The contribution margin can be expressed as an amount and/or as a ratio...
What is the profit and loss statement? Definition of Profit and Loss Statement The profit and loss statement, or P&L, is a name sometimes used to describe a company’s income statement, statement of income, statement of...
What is the profit margin (after tax) ratio? Definition of Profit Margin Ratio The after tax profit margin ratio expresses the company’s net income or earnings as a percent of the company’s net sales. In other words,...
What is par value? Definition of Par Value Par value is a per share amount that will appear on some stock certificates and in the corporation’s articles of incorporation. (Some states may require a corporation to have...
What is accrued payroll? Definition of Accrued Payroll Accrued payroll includes wages, salaries, commissions, bonuses, and other payroll related expenses that have been earned by a company’s employees, but have not yet...
What is the difference between cash flow and free cash flow? Definition of Cash Flow Cash flow refers to the amounts of cash that a company, investment or project generates. The cash that a company generates is different...
What is the difference between the direct method and the indirect method for the statement of cash flows? Main Difference between Direct and Indirect Method of SCF The main difference between the direct method and the...
What are some reasons that cause the balance on the bank statement to differ from the cash balance on the books? Reasons a Bank Balance Will Differ from a Company’s Balance Some of the reasons for a difference between...
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