CMR302 Assignment 6

Help me study for my Economics class. I’m stuck and don’t understand.

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?

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