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MSB 201 Exam 2 Study Guide Part 1 Accounting and Finance New Update!!, Exams of Business Systems

MSB 201 Exam 2 Study Guide Part 1 Accounting and Finance New Update!!

Typology: Exams

2024/2025

Available from 02/16/2025

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MSB 201 Exam 2 Study Guide Part 1 Accounting and Finance
New Update!!
Financial Accounting
Focuses on the preparation, analysis, and reporting of financial information for external
stakeholders, such as investors, creditors, and regulatory authorities
Management Accounting
Focuses on providing internal financial information to assist managers and executives in
decision-making
What is capital?
Money
What is debt financing?
Borrowing money from a creditor with the expectation that the company will pay them
back. The creditor will NOT own any part of the business
What financial statement is shown as of one specific date?
Balance sheet
What is NOT a way financial accounting info is used?
Breakeven Analysis
Two critical conditions that must exist for financial statements to be useful
Comparability and Creditability
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MSB 201 Exam 2 Study Guide Part 1 Accounting and Finance

New Update!!

Financial Accounting Focuses on the preparation, analysis, and reporting of financial information for external stakeholders, such as investors, creditors, and regulatory authorities

Management Accounting Focuses on providing internal financial information to assist managers and executives in decision-making

What is capital? Money

What is debt financing? Borrowing money from a creditor with the expectation that the company will pay them back. The creditor will NOT own any part of the business

What financial statement is shown as of one specific date? Balance sheet

What is NOT a way financial accounting info is used? Breakeven Analysis

Two critical conditions that must exist for financial statements to be useful Comparability and Creditability

The balance sheet embodies which basic accounting equations? Assets = liabilities + owners equity

Owners Equity can be defined as Common stock + retained earnings

If a company's total assets amount to $150,000 and total liabilities and capital contributions amount to $70,000 and $20,000, respectively, then retained earnings must amount to... $60, 150,000-70,000-20,000=retained assets

Given the following balances at the end of the year: Liabilities $22,000, Retained Earnings $4,000, Capital Stock $8,000. Determine the total amount of assets $34, Total assets = total liabilities + capital stock + retained earnings

What is the effect on the financial statements if a cash dividend is paid to owners? Decrease assets and owner's equity, but no effect on liabilities

Which of the following accounts is reported on the income statement? Tax Expense 3 multiple choice options

Refer to picture $ Net Income = Revenue - Expenses

Ratio Analysis Comparisons of info on financial statments that provide insights on company's financial status and future prospects

Debt Ratio Total Liabilities/Total Assets

Debt to Equity Ratio Total Liabilities/Total Owners Equity

CVP Analysis = Sales Revenues - Variable costs - Fixed costs

Use the following information to find the debt ratio: Total liabilities 80, owners equity 120, net income 30, expenses 10, inventory 15 40% 3 multiple choice options

Given the following information, determine the sales price per unit required at an anticipated sales volume of 15,000 units to achieve a net income of $80,000. They have a total fixed cost of $25,000 and a variable costs ratio of 60%.

3 multiple choice options

Examples of product costs Direct labor, Direct materials, manufacturing overhead

Value The worth of an asset, company, and financial performance

Financial Assets Generally intangible assets that can easily be turned into cash

Certificate of Deposit A savings product which can receive a higher interest rate coupled with the requirement that the deposited money remain untouched for a certain time people

Bonds A loan from an investor to a company or government with the promise of repayment and interest in the future

Stocks A share of ownership in a company

r = periodic rate of return t = number of periods

Alternative way to view PV PV = FV/(1+r)^t

TVM Problem Variables -FV -PV -N (how long would it take to...?) -r (rate of return) -Payment

Loan Flow Directions PV = + Pmt = - FV = -

Investment Flow Directions PV = - Pmt = - FV = +

Annuity Flow Directions PV = - Pmt = + FV = +

Nper Total number of PERIODS (NOT YEARS)

Rate = PERIODIC rate (NOT annual rate). Often divided by 12 to show monthly rate

Pmt Regular Payment

Type Payment at beginning or end of period

Perpetuity A stream of cash flows that continues indefinitely

NPV

The sum of all future cash flows

NPV =

Outflow + Σ C/(1+r)^t

How to interpret NPV If NPV > 0: Accept If NPV < 0: Reject If NPV = 0: Doesn't Matter

Logic behind Internal Rate of Return IRR shows how much of a change are expected of the cash flows over time. If IRR is higher than discount rate, profitable

Return Money made or lost in an investment over time

Why is TVM important? Consumption opportunity, Inflation, Investment opportunities

What is an annuity? A financial security that pays a fixed stream of cash flows 3 multiple choice options

What is a perpetuity? A stream of cash flows that continues indefinitely 3 multiple choice options

What is the IRR? -The discount rate that sets the NPV to zero -The return that a project will produce

How do you calculate NPV in excel? The NPV formula - the initial investment 3 multiple choice options

What is the pivotal question of finance? Is it worth it?