1. Accounting
1.1. the recording, classifying, summarizing, & interpreting financial events & transactions
1.2. provides management & other shareholders the info they need to make good decisions
2. Types of Accounting
2.1. managerial
2.1.1. provides info to managers within an organization
2.2. financial
2.2.1. info & analysis for people outside the organization
2.3. auditing
2.3.1. reviews & analyzes info used for financial statements
2.4. tax
2.4.1. focuses on tax law, filing returns, tax strategies
2.5. government & not-for-profit
2.5.1. system for organizations who do not earn a profit
3. Accounting Cycle
3.1. analyze source documents
3.2. record in journal
3.3. post to ledger
3.4. trial balance
3.5. financial statements
3.6. analyze financial statements
4. Key Financial Statements
4.1. balance sheet
4.1.1. accounting equation
4.1.1.1. assets = liabilities + owner's equity
4.1.2. assets
4.1.2.1. resources owned by the firm
4.1.3. liabilities
4.1.3.1. what business owes to others
4.1.4. owner's equity
4.1.4.1. assets - liabilities =
4.2. income statement
4.2.1. summarizes revenues, cost of goods, expenses
4.2.2. revenue
4.2.2.1. monetary value of what firms receive for goods
4.2.3. cost of goods sold
4.2.3.1. cost of items that generated revenue
4.2.4. operating expenses
4.2.4.1. cost of operating a business
4.2.4.2. rent
4.2.4.3. utilities
4.3. statement of cash flows
4.3.1. summary of money coming into & out of the firm
4.3.2. 3 major activities of firm
4.3.2.1. operations
4.3.2.1.1. cash transactions associated with running the business
4.3.2.2. investments
4.3.2.2.1. cash used in or provided by the firm's investment activities
4.3.2.3. financing
4.3.2.3.1. cash raised by:
4.3.2.3.2. used to pay expenses, past debts, or dividends
5. Analyzing Performance using Ratios
5.1. liquidity
5.1.1. how fast an asset can be converted into cash
5.1.2. current ratio
5.1.2.1. current assets / current liabilities
5.1.3. acid-test ratio
5.1.3.1. (cash + AR + Marketable securities) / current liabilities
5.2. leverage
5.2.1. shows the degree to which the firm relies on borrowed funds in operations
5.2.2. debt-to-equity ratio
5.2.2.1. total liabilities / owner's equity
5.3. profitability
5.3.1. show how effectively a firm's managers are using resources to generate profits
5.3.2. basic earning per share
5.3.2.1. net income after taxes / # of common shares outstanding
5.4. activity
5.4.1. show how well managers are turning over inventory
5.4.2. inventory turnover
5.4.2.1. cost of goods sold / average inventory