BMAL-590 Business Finance Exam Questions and Answers 100% Accurate
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Course
BMAL-590 Business Finance
Institution
BMAL-590 Business Finance
BMAL-590 Business Finance Exam Questions and Answers 100% AccurateBMAL-590 Business Finance Exam Questions and Answers 100% AccurateBMAL-590 Business Finance Exam Questions and Answers 100% Accurate
Generally Accepted Accounting Principles (GAAP) - ANSWER-a set of accounting standards that is used...
BMAL-590 Business Finance Exam
Questions and Answers 100% Accurate
Generally Accepted Accounting Principles (GAAP) - ANSWER-a set of accounting
standards that is used in the preparation of financial statements
developed by the Financial Accounting Standards Board (FASB)
Financial Accounting Standards Board (FASB) - ANSWER-The primary accounting
standard-setting body in the United States.
examines controversial accounting topics and issues standards that, in terms of their
impact on accounting practices, almost have the force of law.
Securities and Exchange Commission (SEC) - ANSWER-The agency of the U.S.
government that oversees U.S. financial markets and accounting standard-setting
bodies.
regulates publicly traded U.S. companies as well as the nation's stock and bond
markets. It mandates that companies generate financial statements following
international accounting standards (IAS)
The SEC requires four key financial statements:
(1) the balance sheet
(2) the income statement
(3) the statement of retained earnings
(4) the statement of cash flows
Public Company Accounting Oversight Board (PCAOB) - ANSWER-The group charged
with determining auditing standards and reviewing the performance of auditing firms. It
effectively gives the SEC authority to oversee the accounting profession's activities
Established by the Sarbanes-Oxley Act of 2002
International Financial Reporting Standards (IFRS) - ANSWER-used in many countries
as the regulatory basis for the preparation of financial statements. They are designed to
provide a common global language for financial reporting, particularly in the European
Union, so published financial information is comparable across international boundaries.
A firm's balance sheet - ANSWER-presents a "snapshot" view of the company's
financial position at a specific moment in time.
,By definition, a firm's assets must equal the combined value of its liabilities and
stockholders' equity.
The basic balance sheet equation is Assets = Liabilities + Stockholders' Equity. Thus,
creditors and equity investors finance all of a firm's assets.
The balance sheet consist of three sections that list a firm's assets and liabilities as well
as the claims of the stockholders.
ssets and liabilities appear in descending order of liquidity,
Marketable securities - ANSWER-represent liquid short-term investments, which
financial analysts view as a form of "near cash." They include Treasury notes,
commercial paper, and others.
Accounts receivable - ANSWER-represent the amount customers owe the firm from
sales made on credit.
Inventories - ANSWER-include raw materials, work in process (partially finished goods),
and finished goods held by the firm.
Liquidity - ANSWER-The length of time it takes to convert accounts into cash during the
normal course of business. The most liquid asset (cash) appears first, and the least
liquid (fixed assets) comes last.
Current assets are those that are easy to sell and turn into cash, while fixed assets are
physical assets like buildings and equipment.
Assets - ANSWER-include everything that can be used to benefit the business or give
the company the right to receive benefits
Current Liabilities - ANSWER-those that must be paid within one year and include
accounts payable, notes payable, and accrued expenses
Long-term liabilities - ANSWER-due after more than a year and include deferred taxes
and long-term debt.
stockholders' equity - ANSWER-The last entry on the balance sheet, stockholders'
equity is the owners' residual share of the business, including their original investment
plus any money the firm has earned and retained since its inception.
Stockholders' equity includes preferred stock, common stock, paid-in-capital in excess
of par, and retained earnings. However, the net worth of the firm includes only the
common stock, paid-in-capital in excess of par, and retained earning.
Balance Sheet Assets - ANSWER--organized in order of liquidity:
, 1. Current Assets
-includes all cash and items expected to be converted into cash in next 12 months
A. Cash and Equivalents - money market
B. Accounts Receivable - amounts due from customers
C. Inventory - cost of raw materials
D. Prepaid Expenses - rents, taxes, prepaid advertising
2. Fixed Assets
A. Property Plant and Equipment
-factories
3. Other Assets
A. Intangible Assets
-brand names, trademarks, formulas, etc
Cash and cash equivalents - ANSWER-assets such as checking account balances at
commercial banks that can be used directly as means of payment.
Intangible assets - ANSWER-items such as patents, trademarks, copyrights, or mineral
rights entitling the company to extract oil and gas on specific properties.
Gross property, plant, and equipment (PP&E) - ANSWER-the original cost of all real
property, structures, and long-lived equipment owned by the firm.
Net property, plant, and equipment - ANSWER-calculated as Gross PP&E less
accumulated depreciation - the cumulative expense recorded for the depreciation of
fixed assets since their purchase; this reflects a decline in the asset's economic value
over time. The one fixed asset that is not depreciated is land because it seldom declines
in value.
"book value" - ANSWER-Net PP&E on the balance sheet is the total "book value" of the
assets, which is the original cost of the assets less accumulated depreciation to date.
Depreciation is taken according to standardized formulas and does not reflect the
reduction in actual value of the assets which can vary for many reasons.
Liabilities - ANSWER-debts that the firm owes to others
current liabilities on the balance sheet include three types of accounts: - ANSWER-
Accounts Payable
Notes Payable
Accrued Expenses
Accounts Payable - ANSWER-the amounts owed for credit purchases by the firm
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