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Series 86 Formulas questions and answers verified 2024
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Series 86 Formulas questions and answers verified 2024
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Series 86 FormulasAsset Turnover Ratio - correct answer ✔net sales/average total assets
Inventory Turnover Ratio - correct answer ✔COGS/Average Inventory
Accounts Payable Turnover - correct answer ✔COGS/Average Accounts
Payable
annual depreciation expense - correct answer ✔(cost - salvage value) /
useful life
cost method of accounting - correct answer ✔Used when a company owns a
nominal percentage of another company's outstanding shares
Equity Method of Accounting - correct answer ✔used when a company owns
20-50% of another companys stock. Company A owns 40% of Company B,
and will record it's share of earnings on it's P/L and under other income
Purchase Method - correct answer ✔Record assets and liabilities acquired in
a merge or acquisition at their fair value on the transaction date.
noncontrolling (minority) interest - correct answer ✔The portion of equity (net
assets) interest in a subsidiary not attributable to the parent company.
operating lease - correct answer ✔A contractual agreement allowing one
party (the lessee) to use the asset of another party (the lessor); accounted for
as a rental by the lessee. Does not show up on balance sheet
Show up as an operating expense
, Considered more aggressive than an operating lease
capital lease - correct answer ✔A contractual agreement allowing one party
(the lessee) to use another party's asset (the lessor); accounted for like a
debt-financed purchase by the lessee.
Booked as a fixed asset subject to depreciation
stock split vs stock dividend - correct answer ✔Stock split
-No change in paid-in capital, retained earnings, or common stock
-Decrease in value per share
Stock dividend
-Increase in paid-in capital and common stock
-Decrease in retained earnings
-No change in par value per share
Receivables Turnover Ratio - correct answer ✔Net sales / avg net accounts
receivable
Current Ratio - correct answer ✔Current Assets/Current Liabilities
Working capital ratio - correct answer ✔Net working capital/Sales
Quick or Acid Test Ratio - correct answer ✔(Current Assets - Inventory) /
Current Liabilities
Basic EPS - correct answer ✔(Net Income - Preferred Dividends)/(Weighted
Average of Shares Outstanding)
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