BUS 320 Lecture Notes - Lecture 3: Accounts Receivable, Net Income, Tax Shield
Document Summary
Chapter two//rules of accounting: basic financial statements. Income statement: device to measure firm profitability, covers defined time period, presented in stair-step or progressive fashion to examine profit or loss after each type of expense item deducted, table 2-1. Income statement for the kramer corporation: balance sheet. Items generally stated on original cost basis rather than current market value: statement of retained earnings. Interpretation of balance sheet items: asset accounts are listed in order of liquidity (convertibility to cash), current assets. Items that can be converted to cash within one year: marketable securities, temporary investments of excess cash, accounts receivable, allowance for bad debts to determine anticipated collection value. Includes raw materials, goods in process or finished goods: prepaid expenses, represent future expense items already paid for (examples are rent and insurance) Investments: long-term commitment of funds (at least one year) Investing activities: long-term investment activities in mainly plant and equipment.
