Accounting Chapter 2

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Author:
alexbura
ID:
198822
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Accounting Chapter 2
Updated:
2013-02-09 00:46:35
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accounting
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chapter2
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  1. Operating Cycle 
    Usually 1 year
  2. Calender Year
    1/1 thru 12/ 31
  3. Fiscal Year
    e.g 3/1 thru 2/28
  4. Current Asset
    asset that can be converted to cash within 1 year
  5. Current Liability
    Liability that will be paid within one year
  6. Accumulated Depreciation
    the cumulative amount of depreciation taken as an expense to date
  7. working capital
    Working Capital is the difference between the amounts of current assets and current liabilities

    the formula is current assets minus current laibilities
  8. Depreciation
    systematic allocation of a portion of the asset's cost as an expense
  9. Liquidity
    Ability of the company to pay its obligations within 1 year
  10. Solvency
    the ability of a company to pay its debts and interest as well as the debts balance at its maturity.

    • Liquidity is the company's ability to pay its short term debts
    • Solvency is the company's ability to pay long term debts
  11. current ratio
    A measure used to evaluate a company's liquidity and short term debt paying ability; computed as

    current assets divided by current liabilities
  12. E.P.S
    Earnings Per Share.

    A measure of the net income earned on each share of common stock; computed as net income minus preferred stock dividends divided by the average number of common shares out standing during the year

    Net Income - stock dividends / number of common shares
  13. debt to total asset
    A measure of total financing by creditors

    computed as:

    total liabilities / total assets
  14. 1
    January
  15. 2
    Febuary
  16. 3
    March
  17. 4
    April
  18. 5
    May
  19. 6
    June
  20. 7
    July
  21. 8
    August
  22. 9
    September
  23. 10
    October
  24. 11
    November
  25. 12
    December
  26. Solvency ratio
    Solvency ratios measure the company's ability to survive over a long period of time
  27. Liquidity Ratios
    measures of the short term ability of the company to pay its maturing obligations and to meet unexpected needs for cash

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