Accounting: Chapter 5

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  1. Managers
    Management (Run the business)
  2. Director
    governance (Oversee the business)
  3. Creditor
    Contracting (Administer business)
  4. Investor
    Valuation (Value the business)
  5. Government
    Regulation (ensure compliance & calculation taxes)
  6. Loan covenant
    Terms of a loan agreement, if broken, entitle the lender to force repayment
  7. Canada Revenue Agency (CRA)
    determine the amount of taxes that should be paid by private and public corporation
  8. Canadian Accounting Standards Board (AcSB)
    Primary responsibility is to set GAAP in Canada and produces the CICA handbook
  9. 3 things exist for fraud are?
    Incentive, Opportunity, and Personality
  10. Comparative financial statement
    report numbers for 2 or more time periods
  11. single-step income statement
    reports net income by subtracting a single group of expenses from a single group of revenues
  12. What are four elements of business?
    • 1. Obtain financing
    • 2. Invest in assets
    • 3. Generate revenues
    • 4. Produce net income
  13. Debt-to-assets ratio
    • - % of assets financed by debt
    • - Higher ratio means greater financing risk
  14. Asset turnover ratio
    • - How well assets are used to generate revenues
    • - Higher ratio means greater efficiency
  15. Net profit margin ratio
    • - How well expenses are controlled
    • - Higher ratio mean better performance
  16. Debt-to-assets ratio formula
    Total Liabilities/Total Assets
  17. Asset turnover ratio formula
    Sales revenue/Average total assets
  18. Net profit margin ratio formula
    Net income/Sales revenue
Card Set
Accounting: Chapter 5
Chapter 5 - Financial Reporting and Analysis
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