Accounting
accrual basis of, 49–58
for current liabilities, 97
description of, 1
economic concept of, 21
information, 1
introduction to, 1–13
for payables, 98
process of, 27–44
traditional methods, 17–20
Accounts receivable, 63–64
aged, 71–74
description of, 35
Accrual accounting, 49–58
expense, recognition of, 54–56
revenue, recognition of, 50–54
Accrued expenses, 109
Accumulated depreciation, 94
Activity ratios, 181–182
Advances, 99
Adverse opinion, 12
Aged accounts receivable, 71–74
Amortization, 96
Annual depreciation, 89
Annual percentage rate (APR), 116
Annual report, 2
covers of, 6
and customers, 4
and government, 4
inside of, 8–12
opinions and, 9–12
order of, 12–13
purpose of, 3
reading of, 13
and senior management, 3–4
Annuities, 116–122
Annuity due, 119–122
assets, 28
and income statement, 41–44
liabilities, 29
presentation of, 29–30
spreadsheet, 47
Bank debt, 97–98
Bonds, 127
accounting for, 132–135
callable, 130
convertible, 130–131
ratings, 131–132
redeemable, 130
serial bond (mortgage), 136
terms of, 127–128
valuation, 122–126
zero-coupon, 135
Bookkeeping, 27
Callable bonds, 130
accounting, 21
from financing, 165–166
from investing, 162–165
obtaining, 153–154
from operations, 157–162
used for, 154
Cash flow statements, 170–175
categorizing, 154–155
Common size financial statements, 184
Compound entry, 45
Contract rate, 128
Contributed capital, 143–146
Convertible bonds, 130
Corporate bonds, 127
Coupons, 122
Covenants, 129
Credit, description of, 31
Cumulative preferred shares, 146
accounts receivable, 63–64
aged accounts receivable, 71–74
cash, 59–61
inventory, 74–82
LIFO versus FIFO, 80–83
market securities, 61–62
others, 85
percentage of sales, 65–71
Current liabilities, 97–109
advances, 99
bank debt, 97–98
deferred income tax, 99–108
long-term debt, current maturity for, 98
others, 108–109
payables, 98
Dates, dividends
declaration date, 147
ex-dividend date, 147
payment date, 147
record date, 147
Debentures, 130
Debit, description of, 31
Declaration date, 147
Deferred income tax, 99–108
Deferred tax asset, 108
Deferred tax liability, 107
Denial of opinion, 12
Depletion, 96
Depreciation
accumulated, 94
annual, 89
straight-line, 89
Discounting, 111–115
Discount rate, 128
Discounts, 138–140
dates and, 147
payable, 98
Double declining balance, 90
DuPont analysis, 184–185
Dutch auction tender, 149
Effective rate, 128
method, 140
Equity, 15–22
Estimated warranties, 109
Ex-dividend date, 147
Expense, recognition of, 54–56
Face value, 128
of bond, 122
Fair value reporting, 21–22
FIFO, 17–19
versus LIFO, 80–83
Finance, cash and, 165–166
Financial statement analysis, 177–188
activity, 181–182
calculations, 180–181
common size statements, 184
components of, 178
DuPont analysis, 184–185
leverage, 182–183
liquidity, 183
other ratios, 183–184
profitability, 178–180
Fixed price tender, 148
Free cash flow, 168
Future value (FV), 112–113
GAAP. See Generally accepted accounting principles
General ledger, 31
Generally accepted accounting principles (GAAP), 10
Gross profit, 56
Income statement, 38–41, 48, 56–58
and balance sheet, 41–44
spreadsheet, 47
Interest rates, 115–116
Inventory, 74–82
Investment
and cash, 162–165
grade, 131–132
Leverage, 182–183
versus FIFO, 80–83
Liquidity, 183
Liquid market, 22
Long-term assets, 87–96
Long-term debt, 127–141
bonds. See Bonds
current maturity for, 98
discounts, 138–140
maturity of, 141
premiums, 138–140
Long-term marketable securities, 87
Market rate, 128
Market securities, 61–62
Market value. See Price value
Maturity value, 128
Mortgage bonds, 136
Net profit, 56
Noncurrent assets, 96
Nonfinancial amounts, 144
Open market purchases, 148
Operating profit, 56
Operations, cash and, 157–162
Ordinary annuity, 119–122
contributed capital, 143–146
retained earnings, 147–148
stock dividends, 149–151
stock splits, 149–151
treasury stock, 148–149
Pacioli, Luca, 23
Par value. See Face value of bond
Payables, 98
Payment date, 147
Percentage of sales, 65–71
Preferred shares, 144–147
Premiums, 138–140
Present value (PV), 112–113
Price value, 128
Prime rate, 97
Profitability ratios, 178–180
Profit before tax, 56
Property, plant, and equipment (PP&E), 88–96
Public relations tool. See Annual report
Ratio analysis. See Financial statement analysis
Redeemable bonds, 130
Returnable deposits, 108–109
Return on Assets (ROA), 179
Return on Equity (ROE), 180
Revenue, recognition of, 50–54
Reverse splits, 151
Ross, John, 83–85
Sarbanes–Oxley Act, 25
Serial bonds, 136
Share repurchases, 148
Spreadsheet
with balance sheet entries, 47
with income statement items, 47
Stated rate. See Coupon rate
Statement of profit or loss, 39
Stock dividends, 149–151
Stock splits, 149–151
Straight-line depreciation, 89, 139
T account, 34
Taxes payable, 98
Tax loss recovery, 107–108
Time value of money, 111–113
annuities, 116–122
annuity due, 119–122
ordinary annuity, 119–122
bond valuation, 122–126
discounting, 111–115
interest rate, periodic, 115–116
Treasury stock, 148–149
Wages payable, 98
Yield, 128
Zero-coupon bonds, 135