Chapter 2 - A further look at financial statements. After you have mastered the material in this chapter, you will be able to: Identify the sections of a classified balance sheet; use ratios to evaluate a company’s profitability, liquidity, and solvency. | A Further Look at Financial Statements 2 Kimmel ● Weygandt Survey of Accounting, First Edition WILEY Use ratios to evaluate a company’s profitability, liquidity, and solvency. CHAPTER OUTLINE Identify the sections of a classified balance sheet. 1 2 LEARNING OBJECTIVES Presents a snapshot at a point in time. To improve understanding, companies group similar assets and similar liabilities together. Standard Classifications LEARNING OBJECTIVE LO 1 Identify the sections of a classified balance sheet. 1 Assets Liabilities and Stockholders’ Equity Current assets Current liabilities Long-term investments Long-term liabilities Property, plant, and equipment Stockholders’ equity Intangible assets ILLUSTRATION 2-1 Standard balance sheet classifications LO 1 ILLUSTRATION 2-2 Classified balance sheet LO 1 ILLUSTRATION 2-2 Classified balance sheet Assets that a company expects to convert to cash or use up within one year or the operating cycle, whichever is longer. Operating cycle is the average time it takes from the purchase of inventory, to the sale of goods, and then to the collection of cash from customers. Common types of current assets are (1) cash, (2) investments, (3) receivables, (4) inventories, and (5) prepaid expenses. CURRENT ASSETS THE CLASSIFIED BALANCE SHEET LO 1 Companies list current asset accounts in the order they expect to convert them into cash. ILLUSTRATION 2-3 Current assets section CURRENT ASSETS THE CLASSIFIED BALANCE SHEET LO 1 Cash, and other resources that are reasonably expected to be realized in cash or sold or consumed in the business within one year or the operating cycle, are called: Current assets. Intangible assets. Long-term investments. Property, plant, and equipment. THE CLASSIFIED BALANCE SHEET Review Question LO 1 LO 1 Investments in stocks and bonds of other corporations that are held for more than one year. Long-term assets such as land or buildings that a company is not currently using in its operating activities. Long-term notes . | A Further Look at Financial Statements 2 Kimmel ● Weygandt Survey of Accounting, First Edition WILEY Use ratios to evaluate a company’s profitability, liquidity, and solvency. CHAPTER OUTLINE Identify the sections of a classified balance sheet. 1 2 LEARNING OBJECTIVES Presents a snapshot at a point in time. To improve understanding, companies group similar assets and similar liabilities together. Standard Classifications LEARNING OBJECTIVE LO 1 Identify the sections of a classified balance sheet. 1 Assets Liabilities and Stockholders’ Equity Current assets Current liabilities Long-term investments Long-term liabilities Property, plant, and equipment Stockholders’ equity Intangible assets ILLUSTRATION 2-1 Standard balance sheet classifications LO 1 ILLUSTRATION 2-2 Classified balance sheet LO 1 ILLUSTRATION 2-2 Classified balance sheet Assets that a company expects to convert to cash or use up within one year or the operating cycle, whichever is longer. Operating cycle is the average .
