Business Decision Making Accounting/Finance Review
1. Accounting deals with: • Measuring financial data • Interpreting financial data • Communicating financial data • All of the above
2. The guidelines for accounting are called: • Finance Accounting Standards (FAS) • Generally Accepted Accounting Principles (GAAP) • Public Oversight Committee Rules (POCR) • Good guesses
3. The main financial statements produced by accounting include: • Cash flows, statement of owners equity, profit statement • Income statement, Equity statement, Debit Review statement • Audit report, Annual report, Income report, • Income statement, Balance sheet, Cash Flow
4. The basic accounting equation: • Assets = Liabilities + Equities • Debits = Credits plus fudge factor • Sales = Credit sales collected + Cash sales • Profits = Sales x Profit Margin
5. The balance sheet • Shows a company’s financial position on a certain date • Shows what a company has in storage • Shows check transactions across a year • Presents the income of the company over a time frame
6. The main purpose of finance is to: • Make a lot of money • Increase the value of the firm • Appease shareholders • Help the environment
7. Balance Sheet a. How much does this company own? b. How much do they owe? c. Are they a Corporation?
8. Income Statement • What is the largest cost for the company? • What is another name for the variable costs that relate to making the product? • List one way to increase profits for this company. • If each company could decrease all selling costs by 10%, what would the new level of profits be?
9. Cash Flow • What is the largest use of cash for this company? • Where is the biggest source of cash for this company?
10. Breakeven • If the product costs $23 to produce in material, labor, and other costs, what is the lowest price that can be charged for the product?
11. Ratios • What is ROS? • Should ROS be high or low? • What is ROA? • Should it be high or low? • What is ROE? • Should it be high or low?
12. Raising funds • What are the three basic ways to raise funds for a business? • If a company needs money for the next two weeks, how could it raise the funds? • If a company needs money for ten years, how could it raise the funds?
13. • List two impacts on a company from issuing more stock. • List two impacts of using long-term debt. • List two consequences of issuing dividends.
14. Forecasting/Budgeting • If you were to develop a forecast/budget for the next year, what things would be calculated? • What would be the benefit of having a forecast? (Are the pro formas helpful?)
15. Global Financial Implications • If the game were to have foreign competition, list three things that could impact the company’s financial performance.