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Chapter 1

Chapter 2

1. Assets(자산)
   1. Concept
      1. Economic resources that are owned or controlled by a company.
      2. Each asset must be assigned a dollar amount.
   2. Common Assets
      1. Cash(현금)
         1. Coins, Currency, Checks.
      2. Accounts Receivable(매출채권)
         1. Money owed to a company that sold goods or services to a customer on credit.
      3. Inventory(재고자산)
         1. Items that are purchased or manufactured by a company and are resold.
      4. Building(건물)
         1. Structures used in the operations of a business.
      5. patents(산업재산권)
         1. An exclusive right granted by the federal government to manufacture and sell an invention.
2. Liabilities(부채)
   1. Concept
      1. Obiligations to pay cash, transfer other assets, or provide services to someone else.
   2. Common Liabilities.
      1. Accounts Payable(매입채무)
         1. Money owed as a result of the purchase of goods and service on credit.
      2. Taxes Payable(미지급 법인세)
         1. Money owed to federal and state governments resulting from the application of tax laws.
      3. Mortgage Payable
         1. Money owed relating to the purchase of property
      4. Unearned Revenue(선수금)
         1. When customer pay for service or product in advance, the company owes service or product(not money) to the customer.
3. Owners' Equity(Net Asset, Stockholders' equity, 자본)
   1. Concepts
      1. The remaining claim against the assets of a business, after the liabilities have been deducted, is owners' equity.
   2. Sources of Owners' Equity.
      1. Paid-In Capital
         1. The amount given by shareholders to obtain shares of stock from a company.
      2. Retained Earnings
         1. Earning that are retained in the business.
   3. 용어들
      1. Stockholders(shareholders)
         1. The owners of a corporation
      2. Dividends
         1. Distributions to the owners
         2. Owners' equity is decreased when the owners take back part of their investment.
      3. Capital Stock
         1. The portion of owners' equity contributed by owners in exchange for share of stock is called capital stock.
         2. The amount of retained earnings plus the amount of capital stock equals the corporation's total owners' equity.
4. Accounting Equation
   1. Assets = Liabilities + Owners' Equity.
   2. Double-entry accounting(복식부기)
      1. A system of recording transactions in a way that maintains the equality of the accounting equation.
5. Classified and Comparative Balance Sheets.
   1. Current Assets(유동자산)
      1. Include cash and other assets that are expected to be converted to cash within a year.
      2. Listed in decreasing order of liquidity.
   2. Long-term Assets(고정자산)
      1. Such as land, buildings, equipment.
   3. Current Liabilities(유동부채), Long-term Liabilities(고정부채)
   4. Classified Balance Sheet
      1. A balance sheet in which assets and liabilities are subdivided into current and long-term categories.
   5. Comparative Financial Statements
      1. Reader can identify any significant changes in particular items.
6. Limitations of a Balance Sheet.
   1. The primary Limitation of the balance sheet is that it does not reflect the current value or worth of a company.
   2. The book value is usually less than the market value of the company.
      1. Book value
         1. The value of a company as measured by the amount of owners' equity.
      2. Market value
         1. The value of a company as measured by the number of shares of stock outstanding multiplied by the current market price of the stock.
7. The Income Statement.
   1. Concepts
      1. The income statement(손익계산서)
         1. Shows the result of company's operations for a period of time.
      2. Net income(당기순이익)
         1. The difference between revenues and expenses.
         2. the "bottom-line" of an income statements is net income.
      3. Remember, the income statement covers a period of time; the balance sheet is a report at a point in time.
   2. Categories
      1. Revenues
         1. The amount of assets created through business operations
      2. Expenses
         1. The amount of assets consumed through business operations
      3. Net Income(or Net loss)
         1. An overall measure of the performance of a company.
         2. Revenues - Expenses
            1. if (Revenues > Expenses) => Net Income
            2. if (Revenues < Expenses) => Net Loss
      4. The format of an Income Statement
         1. Gross Profit(or Gross margin,매출총이익)
            1. Sale(매출액) - Cost of goods sold(매출원가)
         2. Gains and losses
            1. Refer to money made or lost on activities outside the normal business of a company.
         3. Earning per share(EPS)
            1. Net income / number of shares of stock outstanding.
8. The Statement of Retained Earning
   1. Identifies changes in retained earnings from one accounting period to the next.
   2. Students often make the mistake of assuming that if a company has retained earnings, the company has cash. That is not true. To determine how much cash a company has, you would examine the balance in the company's cash account - not the balance in the company's retained earnings account.
9. The Statement of Cash Flows
   1. Operating Activities
      1. Activities that are part of the day-to-day business of a company.
   2. Investing Activities
      1. The purchases and sale of land, buildings, and equipment.
      2. Activities associated with buying and selling long-term assets.
   3. Financing Activities
      1. Cash is obtained from or repaid to owners and creditors.
10. Articulation
    1. The relationship between an operating statement9the income statement or the statement of cash flows) and comparative balance sheets, whereby an item on the operating statement helps explain the change in an item on the balance sheet from one period to next.
11. Fundamental Concepts and Assumptions
    1. The separate Entity Concept
       1. The idea that activities of an entity are to be separated from those of the individual owners.
       2. Accounting records should be kept for those entities
    2. The Assumption of Arm's-Length Transactions
       1. Business dealings between independent and rational parties who are looking out for their own interest.
    3. The Cost Principle
       1. The idea that transactions are recorded at their historical costs or exchange prices at the transaction date.
    4. The Monetary Measurement Concept
       1. The idea that money, as the common medium of exchange is the accounting unit of measurement, and that only economic activities measurable in monetary terms are included in the accounting model.
    5. The Going Concern Assumption.
       1. The idea that an accounting entity will have a continuing existence for the foreseeable future.

Chapter 3

1. Accounting Cycle
1. Analyze Transactions
1. Determine how those transactions affect the accounting equation
2. Record the effects of the transactions
1. Record the result of transactions using journal entries.
2. journal = 일기장(회계장부의 일종)
3. Summarize the effects of transactions
1. Posting journal entries
1. Posting 이란 Journal -> ledger 로 옮기는 작업을 말한다.
2. Ledger 란 '원장'을 이야기 하는데 account(회계항목) 별로 쫙 모아 놓는것을 말한다.
2. Preparing a trial balance
1. Trial Balance 란 '시산표' 를 말하는데 'Lists each account with its debit or credit balance'
4. Prepare reports
2. Origin of Debit & Credit
1. Mixing '+' and '-' in one column would provide ample opportunity to make mistake. This problem was solved by separating the '+' and the '-' for each account into separate columns, so called 'Debit' & 'Credit'
3. Expanded Account Equation
1. 그림 넣기.
4. Even if the trial balance does show total debits equal to total credits, there may be errors
1. A transaction may have been omitted completely
2. It may have been recorded incorrectly
3. Posted to the wrong account
5. Trial Balance vs Balance Sheet
1. Trial Balance
1. Strictly an internal document used to summarize all of the account balances.
2. Most businesspoeple never see a real trial balance during their entire business career.
2. Balance sheet
1. A summary document that is frequently provided to interested parties both inside & outside a company.
6. 3장 Problems 에서 애매한 부분
1. Paid $50,000 mortgage payment, of which $30,000 represents interst expense.
1. Interest Expense      30,000
   Mortgage Payable    20,000
       Cash                           50,000
2. Paid Installment of $10,000 on note
1. Note Payable        10,000
       Cash                           10,000
3. Received $10,000 cash and 3,000 notes in settlement of customers' accounts
1. Cash                          10,000
   Note Receivable            3,000
       Accounts Receivable        13,000
4. Inventory 는 재고자산 고로 Current Assset 이라는거.

Chapter 5

1. The Need for Financial Statement Analysis
   1. To evaluate the Performance of a company
   2. To predict how it will do in the future.
   3. The usefulness of financial ratios is greatly enhanced when they are compared with past values and with values for other firms in the same industry.
2. Widely Used Financial Ratios
   1. Debt Ratio (A measure of Leverage)
      1. Total Liabilities / Total Assets
      2. Caution! The debt ratio is often confused with the debt-to-equity ratio and the asset-to-equity ratio. Make sure when discussing a leverage ratio, it is understood which one is being used
   2. Current Ratio (A measure of Liquidity)
      1. Current Assets / Current Liabilities
   3. Return on Sales (A measure of the amount of profit earned per dollar of sales)
      1. Net Income / Sale
      2. ex) $7,829/$28,365 = 27.6% Microsoft makes 27.6 cent of profit on each dollar of sales.
   4. Asset Turnover (A measure of company efficiency)
      1. Sales / Total Assets
      2. The higher the asset turnover ratio, the more efficient the company is at using its assets to generate ales.
   5. Return on Equity (A measure of the amount of profit earned per dollar of investment)
      1. Net Income / Stock holders' Equity
      2. Investors want to know how much profit they earn for each dollar they invest
      3. Good companies typically have return on equity values between 15% and 25%
      4. ROE above 15% is a sign of a company in good health; ROE below 15% is a sign of trouble.
      5. ROE is the fundamental measure of overall company performance and forms the basis of the Dupont Framework.
   6. Price-Earnings Ratio (A measure of growth potential, earnings stability, and management capabilities)
      1. Market value of Shares / Net Income = Market price of stock / EPS
      2. High PE ratios are associated with firms for which strong growth is predicted in the future.
      3. YAHOO has one of the highest PE ratios in the world, but it is not found on the list of companies with high net income. The reason Yahoo is values so highly is that it is expected to continue to grow so rapidly in the future that its current income is small compared with what investors are expecting in the future.
3. Common-Size Financial Statements
   1. Financial Statements achieved by dividing all financial statement numbers by total sales for the year.
   2. Use common-size financial statements to perform comparison of financial statements across years and between companies.
   3. The most informative section of the common-size balance sheet is the asset solution, which can be used to determine how effectively a company is using its assets
4. Dupont Framework
   1. A systematic approach for breaking down return on equity into three ratios
      Return on Sales, Asset Turnover, Assets-to-Equity ratio
   2. ROE = Profitability x Efficiency x Leverage
      1. Profitability(Return on Sale)
         1. The number of pennies in profit generated from each dollar of sale
         2. $1 팔았을 때 얼마 남았나?
      2. Efficiency(Asset Turnover)
         1. The number of dollars in sales generated by each dollar of assets
         2. $1 의 자산을 활용해서 얼마를 팔았나?
      3. Leverage(Asset-to-Equity)
         1. The number of dollars of assets acquired for each dollar invested by stockholders.
         2. $1 의 자본을 가지고 총 얼마의 자산을 운용했나?
      4. 자 여기서 분석. Leverage 가 높다는 것은 그만큼 땡겨 쓴 돈이 많다는 거다. 이것은 좋을 수도 있고 나쁠 수도 있는데, 투자자들은 높은걸 선호하는 반면 Lender, 돈빌려준 사람, 은 낮은걸 선호한다. 왜냐? 투자자들은 자기가 투자한 돈을 가지고 회사에서 훨씬 많은돈을 땡겨 사업이 빠르게 확장되는걸 원하는 반면 Lender 는 그러다가 회사가 지불능력이 나빠질 것을 우려하기 때문이다.
5. Cash Flow Ratios
   1. Usefulness of Cash Flow Ratios
      1. Large Non-cash Expenditure
      2. Rapid Growth
      3. Window Dressing Time
   2. Cash Flow to Net Income
      1. Cash from operation / Net Income
      2. It reflects the extent to which accrual accounting assumptions and adjustments have been included in computing next income.
      3. In general, the cash flow-to-net income ratio will have a value greater than one because of significant noncash expenses that reduce reported net income but have no impact on cash flow.
   3. Cash Flow Adequacy
      1. Cash from Operations / Cash paid for capital expenditure
      2. 'Cash cow' is a business that is generating enough cash from operations to completely pay for all new plant and equipment purchases with cash left over to repay loans or distribute to investors.
6. Potential Pitfalls
   1. Financial statements analysis usually does not give answers but instead points in directions where further investigation is needed.
   2. Financial Statements don't contain all the information
      1. All information is not numerical
      2. Lack of Comparability between companies
      3. Not all Problems Readily Apparent
      4. financial Statement is based on past performance
         
         

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