If a company has stockholders’ equity of $60,000 at the end of the year, which of the following statements must be true?

reflects the company’s ability to pay current debt

inventory turnover ratio

can be used to assess the company’s frequency of selling inventory

the receivables turnover ratio

depicts the companys’ frequency of cash collections

times interest earned ratio

income before interest & taxes / interest expense

a discontinued operation refers to:

the sale or disposal of a significant component of a company’s operations.

If a company has stockholders’ equity of $60,000 at the end of the year, which of the following statements must be true?

The company’s assets exceed liabilities by $60,000

Which account represents a resource of the company?

accounts receivable

Assets

Things company owns & uses to generate revenue

Liabilities

Amount that company owes

Equity

Amount invested in company by owners; owners claim no assets

Accounting equation

Assets = liabilities + equity

Truism in business

Company never receives greater than it gives & never gives greater than it receives

4 Rules of debits & credits

1. Debit amount received; credit amount given up
2. Debuts on left; credits on the right
3. In each transactions; list debits first (good) & credits last (bad)
4. Total debits = total credits

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Making an ethical decision

1. Identify ethical concerns- use personal ethics to recognize concern
2. Analyze options- consider all good & bad consequences
3. Make ethical decision- choose best option given circumstances

Fraud

Intentional manipulation- focus on prevention. Once fraud is committed, loses are rarely retrieved.

 

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