Chapter 2

Obligations that a company resonably expects to pay within the next year or operating cycle, whichever is longer.

Cash remaining from operating activities after adjusting for capital expenditures and dividends paid.

Measures of the operating success of a company for a given period of time.

The agency of the U.S. government that oversees U.S. financial markets and accounting standard-setting bodies.

An assumption that requires that only those things that can be expressed in money are included in the accounting records.

A balance sheet that contains a number of standard classifications and sections.

Accounting principle that dictates that companies disclose circumstances and events that make a difference to financial statement users.

The quality of information that indicates the information makes a difference in a decision.

An accounting principle that states that companies should record assets at their cost.

An expression of the mathematical relationship betweenn one quantity and another, may be expressed as a percentage, a rate, or a proportion.

An assumption that the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared for the business.

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

The ability of a company to pay interest as it comes due and to repay the balance of debt at its maturity.

A financial statement that presents the factors that caused stockholders' equity to change during the period, including those that caused retained earnings to change.

Cash and other resources that companies reasonably expect to convert to cash or use up within one year or the operating cycle, whichever is longer.

The approach of choosing an accounting method, when alternatives exist, that will least likely overstate assets and net income.

The ability of a company to pay obligations that are expected to become due within the next year or operating cycle.

A technique for evaluating financial statements that expresses the relationship among selected financial statement data.

Measures the percentage of total financing provided by creditors; computed as total debt divided by total assets.

The assumption that the company will continue in operation for the foreseeable future.

Generally, (1) investments in stocks and bonds of other corporations that companies hold for more than one year, and (2) long-term assets, such as land and buildings, not currently being used in the company's operations

A set of rules and practives, having substantial authoritative support, that the accounting profession recognizes as a general guide for financial reporting purposes.

A measure used to evaluate a company's liquidity and short-term debt-paying ability; computed as current assets divided by current liabilities.

The constraint of determining whether an item is large enough to likely influence the decision of an investor or creditor.

The group charged with determining auditing standards and reviewing the performance of auditing firms.

Use of the same accounting principles and methods from year to year within a company.

The difference between the amounts of current assets and current liabilities.

Measures of the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash.

Ability to compare the accounting information of different companies because they use the same accounting principles.

The primary accounting standard-setting body in the United States.

The average time required to go from cash to cash in producing revenues.

Assets with relatively long useful lives that companies use in operating the business and are not intended for resale.

An assumption that every economic entity can be separately identified and accounted for.

An accounting standard-setting body that issues standards adopted by many countries outside of the United States.

Assets that do not have physical substance.

Measures of the ability of the company to survive over a long period of time.

Obligations that a company expects to pay after one year.

The quality of information that gives assurance that is free of error, is factual, and is neutral.