Wednesday April 11th AGENDA

1
Wednesday April 11th AGENDA

• Chapter 11
• Chapter 12

2
Income Determination and Earnings

• Revenue recognition timing of revenue
• At the time of the sale or rendering of the
  service
• During production
• Completed production
• As cash is received
• Recognition of expenses Matching Principle is
  important

3
Chapter 11

• Non-operating items affecting earnings
• Discontinued operations
• Extraordinary items
• Cumulative change in accounting principle
• All non-operating items are shown net of taxes
• Accounting Changes
• Change in Accounting Principle
• Change in Accounting Estimate

4
More on 11

• Earnings per share
• Net Income Preferred Dividends
• Weighted average of shares outstanding
• Prior Period Adjustment (usually due to errors)
• Affects Retained Earnings

5
Chapter 12 Financial Statement Analysis

• Reasons for Analysis
• Evaluate performance
• Compare for investing purposes
• Lending decisions
• Use for customer/ business relations
• Internal decisions

6
Chapter 12

• Resources
• Annual Report
• Computerized data
• Annual stockholders meetings
• Investments journals and newsletters
• Information is most useful when it can be
  compared with other data, for example
• Current to prior
• Current to budget
• Current to competitor
• Current to industry average

7
Chapter 12

• Horizontal
• increases or decreases
• Trends
• Vertical
• Common size financial statements
• Components are analyzed

8
Chapter 12

• Ratio Analysis
• Review summary
• Profitability
• Return on total sales
• Return on sales
• Asset Turnover
• Return on common stockholders equity
• Earnings per share
• Price-earnings ratio
• Leverage
• Debt to equity and times interest earned

9
Chapter 12, last one ?

• Liquidity
• Current Ratio
• Acid-test (quick) Ratio
• Activity
• Accounts receivable turnover
• Number of days to collect receivables
• Inventory turnover
• Number of days supply in inventory
• Operating cycle