38) The Securities and Exchange Commission (SEC) is a U.S. government agency that oversees proper use of GAAP by companies that sell stock and debt to the public.
39) The four common forms of business ownership include sole proprietorship, partnership, corporation, and non-profit.
40) The four common forms of business ownership include sole proprietorship, partnership, limited liability company (LLC), and corporation.
41) The three major types of business activities are operating, financing, and investing.
42) Planning is a part of each business activity (operating, investing, and financing), and gives each activity meaning and focus.
43) Financing activities provide the resources organizations use to pay for resources such as land, buildings, and equipment.
44) Investing activities include long-term borrowing and repaying of cash from lenders.
45) Investing activities are the acquiring and disposing of resources that an organization uses to acquire and sell its products or services.
46) Owner financing refers to resources contributed by creditors or lenders.
47) Revenues are increases in equity (via net income) from a company's sales of products and services to customers.
48) A net loss occurs when revenues exceed expenses.
49) Net income occurs when revenues exceed expenses.
50) Liabilities are the owner's claim on assets.
51) Assets are the resources a company owns or controls that are expected to yield future benefits.
52) Owner withdrawals are subtracted as expenses in the calculation of net income.
53) The accounting equation can be restated as: Assets − Equity = Liabilities.
54) The accounting equation implies that: Assets + Liabilities = Equity.
55) Owner's investments are increases in equity from the sale of products or services.
56) Every business transaction leaves the accounting equation in balance.
57) An external transaction is an exchange within an entity that may or may not affect the accounting equation.
58) From an accounting perspective, an event is a happening that affects the accounting equation, but cannot be measured.
59) Owner's equity is increased when cash is received from customers in payment of previously recorded accounts receivable.
60) An owner's investment increases equity via net income.
61) Return on assets is often stated in ratio form as the amount of average total assets divided by revenue.
62) Return on assets is often stated in ratio form as the amount of income divided by assets invested.
63) Return on assets is useful in evaluating management, analyzing and forecasting profits, and planning activities.
64) Arrow's net income of $120 million and average total assets of $1,500 million results in a return on assets of 8%.
65) Risk is the uncertainty about the return we will earn.
66) Generally, the lower the risk, the higher the return that can be expected.
67) U.S. Government Treasury bonds provide low return and low risk to investors.
68) The four basic financial statements include the balance sheet, income statement, statement of owner's equity, and statement of cash flows.
69) An income statement reports on investing and financing activities.
70) A balance sheet covers activities over a period of time such as a month or year.
71) The income statement describes revenues earned and expenses incurred along with the resulting net income or loss over a specified period of time.
72) The statement of cash flows shows the net effect of revenues and expenses for a reporting period.
73) The income statement shows the financial position of a business on a specific date.
74) The first section of the income statement reports cash flows from operating activities.
75) The balance sheet is based on the accounting equation.
76) Investing activities involve the buying and selling of assets such as land and equipment that are held for long-term use in the business.
77) Operating activities include long-term borrowing and repaying cash from lenders, and cash investments or withdrawals by the owner.
78) The purchase of supplies appears on the statement of cash flows as an investing activity because it involves the purchase of assets.
79) The income statement reports on operating activities at a point in time.
80) The statement of cash flows identifies cash flows separated into operating, investing, and financing activities over a period of time.