CMR 302 Miami University Cash Basis Accounting Discussion
Please help solve the problem according to the book.
- How does Peter Drucker define profit?
- Define the term “cash basis accounting”.
- Define the “matching principle”
- Describe the delivery company that purchased a truck in January and how it applies to the matching principle.
- Explain why the Income Statement does not account for the inflows and outflows of cash.
- Define the purpose of the Income Statement.
- List three alternative names for the Income Statement
- What time periods can the Income Statement cover?
- Public companies must follow GAAP in compiling financial statements TRUE/FALSE
- What is a Pro-forma Income Statement?
- Sales and Revenue on the Income Statement mean the same thing TRUE/FALSE
- Define the term “Cost of Sales”.
- Why are footnotes considered to be an important part of the financial statements?
- What is the “One Big Rule” when reading financial statements?
- In its simplest form, when can a company recognize a sale?
- In the example in the book, how did the software company manipulate revenue recognition?
- What is “channel stuffing”?
- “The most common source of accounting fraud has been and probably always will be _____________
- Define “deferred revenue”.
- “Above the line” on the Income Statement refers to what?
- “Below the line on the Income Statement refers to what?
- Define “Operating Expenses”
- Operating expenses are often thought of and referred to as ________________
- How did Waste Management Inc. use depreciation to manipulate earnings?
- Why is depreciation and amortization considered a “non-cash expense”?
- Give an example of a “one time charge”.
- Expenses should be listed on the Income Statement to assist management in analyzing the business. TRUE/FALSE
- Gross Profit varies by industry. TRUE/FALSE
- Compare the gross profit of a grocery business to a jewelry store.
- Define Operating Profit or EBIT
- List three ways Operating Profit can measure how well or poorly a company is being managed
- Define EBITDA
- Why is EBITDA favored over EBIT by financial analysts?
- Define “Net Profit”
- List the three legitimate fixes to a low net Profit
- What are the negative consequences of reducing Operating Expenses as a strategy to increase Net Profit?
- How can “exchange rates” adversely affect Net Profit?
