BUAD 285a Chapter Notes - Chapter 2: Financial Statement, Going Concern, Accrual

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Document Summary

Groups assets, liabilities, and stockholder"s equity items into subsections. Current: expected to use, convert to cash, or pay in cash within a year or an operating cycle: assets: Current assets: cash, accounts receivable, inventory, prepaid expenses. Long-term investment: stocks, buildings not used in operations. Property, plant, and equipment (pp&l): buildings, machines (can be depreciated) Long-term liabilities: bonds payable, mortgages payable: stockholder"s equity: common stock, retained earnings. Profitability: measures company"s operational success: earnings per share (eps) = Liquidity: short-term ability to pay obligations: working capital = current assets current liabilities, current ratio: Solvency: long-term ability to pay obligations: debt to total assets ratio: Set in the us by the securities and exchange commission (sec) through the financial. Outside the us: international financial reporting standards (ifrs) Fundamental qualities of financial reporting: relevance: would make a difference for business decisions, faithful representation: information is complete and accurately describes economic events.

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