# Intermediate Financial Accounting
### (Intermediate Financial Accounting)

Financial statements
* Balance sheet
** The balance sheet in its simplest form is covers the accounting equation (Asset=liabilities + Equity) at a specific point in time ex. Dec. 31 20XX.
* Income Statement
** The income statement covers the profit and loss over a period of time such as year 20XX. With the Goal of finding the net income with the equation ( Net Income = Revenue+ Gain) -(expenses + losses)
* Cash Flow Statement
** the statement of cash flows is primarily concerned with the changes in specific assets and liabilities over a period of time. the four areas the the cash flow statement reports on are operating activities (primary source business income), investing activities ( Changes in Porperty, plant and equipment and long term investments), Financing activities (Changes in Equity) and Supplemental information (Changes in signficant items that do not involve cash such as exchanges)
Useful Ratios
*** Liquidity Ratios
**** Current
**** Acid test
*** Activity Ratios
**** Turnover tests
*** Profitability Ratios
**** Return on Assets
**** Return on Equity
**** Profit Margin
*** Coverage Ratios

### (Example Balance Sheet and Income Statement)

| Current assets | Year 2 | Year 1 |
| Cash and Cash Equivalents | $55 | $60 |
| Receivables | $100 | $85 |
| Inventory | $75 | $50 |
| Total Current Assets | $220 | $190 |
| Non current assets | | |
| Property, Plant, and Equipment | $200 | $200 |
| Investments | $20 | |
| Intangible Assets: Goodwill and Other | $5 | |
| Total Assets | $455 | $395 |
| Liabilities | | |
| Accounts Payable | $25 | 15 |
| Notes payable | $75 | $30 |
| Current Liabilities | $100 | $45 |
| Long-Term Debt | $200 | $200 |
| Stockholders Equity | | |
| Common stock | $145 | $145 |
| Retained earnings | $10 | $5 |
| Total Liabilities and Equity | $455 | $395 |
| Income Statement | |
| Sales | 300 |
| Cost of Goods sold | 200 |
| Selling, general and adminstrative | 40 |
| Interest expense | 10 |
| Total expense | 250 |
| Income before income taxes | 50 |
| Income tax expense (30%) | 15 |
| Net income | 35 |
Liquidity Ratios Liquidity ratios these ratios measure a firms’ efficiency and ability to meet obligations to other lenders
| Working capital | current assets minus current liabilities |
| Current ratio | Current assets divided by current liabilities |
| Acid or quick ratio | Cash plus accounts receivable plus marketable securities divided by current liabilities |
| Time interest earned ratio | Net income plus interest expense plus income tax expense. Divide by interest expense |
| Account receivable turnover | Net credit sales divided by average accounts receivable |
| Number of days in Accounts Receivable | 365 divided by Accounts Receivable turnover |
| Inventory turnover | Cost of goods divided by average inventory |
| Numbers of days in inventory | 365 divided by inventory turnover |
Probability and equity ratio’s these measure operation results and measure sources of equity
| Profit margin | Net income divided by sales |
| Return on assets | Net income divided by average total assets |
| Return on equity | Net income divided by average common stockholder equity |
| Earning per share | Net income minus preferred dividends divided by weighted average common shares |
| Price to earnings ratio | Stock price per share divided by earnings per share |