2. Profit and Loss Statement Balance Sheet Ratio Analysis Working Capital Investment Appraisal Potpourri 100 200 300 400 500 100 200 300 400 500 200 300 400 500 200 300 400 500 200 300 400 200 300 400 500

3. Answer: This is normal profit. ? The minimum amount an owner must make to stay in business is known as _____ profit.

4. ? If a business is doing well, it is said to be “in the _____.” Answer: It is “in the black”.

5. ? Which statement covers a period of time—profit and loss statement or balance sheet? Answer: A profit and loss statement covers a period of time; a balance sheet provides financial information for one day.

6. ? Profit before expenses is known as _____ profit. Answer: This is gross profit.

7. ? If net profit after tax is $60,000 and the number of shares issued is 1,000, the earnings per share would be: Answer: Earnings per share = net profit after tax number of shares issued = $60 per share

8. Answer: Assets = Liabilities + Capital ? The accounting equation is: _____ = _____ + _____.

9. Answer: The answer is own. ? An asset is something that you o__.

10. Answer: Current liabilities have to be repaid in one year or less. ? What kind of debts have to be repaid in one year or less—current liabilities or long-term liabilities?

11. Answer: Certified Public Accountant ? What does CPA stand for?

12. Answer: Arthur Andersen bit the dust. The Big 4 are PricewaterhouseCoopers, Deloitte and Touche, Ernst and Young, and KPMG. ? The top accounting firms used to be known as the Big 5. Now they are called the Big 4. Which firm went under due to poor accounting practices?

13. ? If current assets are $105,000 and current liabilities are $60,000, the current ratio is: Answer: The current ratio is: current assets current liabilities $105,000 $60,000 or 1.8

14. ? Calculate stock turnover— number of times: Cost of goods sold is $75,000 and stock is $35,000. Answer: Stock turnover (number of times) cost of goods sold stock $75,000 $35,000 or 2.1 times

15. ? Calculate return on capital employed (ROCE): Net profit before tax and interest is $225,000. Total capital employed is $600,000. Answer: Return on capital employed is: net profit before tax and interest total capital employed $225,000 $600,000 x 100 = 37.5%

16. ? GIGO means: Answer: GIGO means Garbage In, Garbage Out. Your financial data is only as good as the person who keys it in. It must be accurate for your statements.

17. ? Accounting is known as the _____ of _____. Answer: Accounting is known as the language of business.

18. ? Current assets should be about 1 ½ times the value of current liabilities to have adequate working capital. If current liabilities are $600, what should be the value of current assets? Answer: Current assets should be $900--$600 x 1.5

19. ? What is one solution to a liquidity problem for a business? Answer: Sell fixed assets; lease assets; call in debt factoring company; ask for extension with creditors; offer cash discounts for debtors; make only essential purchases; sell unsold raw materials; get short-term loan; stop withdrawals.

20. ? Debtors’ accounts should be _____ so that you know how long their account has been outstanding or unpaid. Answer: These accounts should be aged.

21. ? With _____ credit policies, it is more difficult for your customers to get credit, but it could save your business from liquidity problems. Answer: This is called tight credit policies.

23. ? In accounting, when these are around numbers it indicates that they are negative. Answer: ( )

24. ? It is better for a business to _____ estimate costs and _____ estimate revenue. Answer: Overestimate costs and underestimate revenue

25. ? These types of costs are difficult to accurately predict from month to month: _____ costs. Answer: These are variable costs.

26. ? If payments are more than receipts, this is a(n) _____ cash flow. Answer: This is a negative cash flow.

27. ? If profit is $900 for a period of 3 years, profit per annum is: _____. Answer: Profit per annum is: $900 3 = $300 per annum

28. ? Which of the following is a source of internal financing? A) credit cards B) mortgages C) working capital D) long-term loans Answer: All of these are external sources of financing except for C) working capital.

29. ? Identify what would occur in the following transaction: Charged $300 worth of supplies from Staples. Answer: Supplies would increase by $300; the amount owed to Staples would increase by $300.

30. ? Which type of accountant would be more involved in determining how much a new product would cost to launch: managerial, financial, or cost accountant? Answer: This would be a cost accountant.

31. Answer: Net interest is $1,800. Interest receivable--$3,000 less Interest payable--$1,200 ? Calculate net interest: interest receivable is $3,000 and interest payable is $1,200.

32. Answer: The answer is ratios. ? _____ let you compare two related figures.

33. ? Find the closing balance for the January cash flow forecast: Total receipts are $500; Total payments are $200; Opening balance is $100; Closing balance for January is _____. Answer: The closing balance for January is $400. Total receipts--$500 less Total payments--$200 plus Opening balance--$100 = $400

34. ? The amount of time it takes to recover your money when you invest it in a project is known as the _____ _____. Answer: This is called the payback period.