hft 2401 chapter 6 the balance sheet questions answered by balance sheet amount of cash on hand?...
TRANSCRIPT
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HFT 2401
Chapter 6The Balance Sheet
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Questions Answered by Balance Sheet
Amount of Cash on Hand?
What is the Total Debt?
What is Funding Mix?
How Much is Owed to the Hotel?
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Questions Answered by Balance Sheet
What are the Tax Liabilities?
Can Current Debt be Paid?
What is the Financial Strength?
How Much have Stockholders Invested in the Assets?
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Purposes of the Balance Sheet
The Income Statement: Pertains to a period of time
The Balance Sheet – Pertains to a given date
Primarily use by creditors and investors
Used quite a bit for various ratio analysis to monitor the overall “health” of the business
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Liquidity
The ability of the operation to convert assets to cash to meet current liabilities
Current Ratio- Used by creditor and investors
Current Assets / Current Liabilities
s/b around 2 : 1
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Balance Sheet Limitations
Does Not Reflect Current Values of Assets (Booked According to Cost Principle)
Does Not Include Some Things of Value Such as Personnel, Location, Customer Base, Goodwill
Numbers are of a Static Nature
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Balance Sheet Limitations
Becomes Quickly Outdated
Some Account Balances are Estimates Such as Depreciation and Estimates for Uncollectibles – Based on Best Judgment
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Balance Sheet - The Statement of Financial Position
Assets = Liabilities + Equity
Statement of Assets, Liabilities, and Owners’ Equity at a Point in Time
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Balance Sheet - The Statement of Financial Position
AssetsCurrent AssetsNoncurrent ReceivablesInvestmentsProperty and EquipmentOther Assets
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Balance Sheet - The Statement of Financial Position
LiabilitiesCurrent LiabilitiesLong Term DebtDeferred Income TaxesCommitments / ContingenciesOther Long-Term Liabilities
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Balance Sheet - The Statement of Financial Position
Owners’ EquityCapital StockAdditional Paid In CapitalRetained EarningsTreasury Stock
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Balance Sheet Formats and Structure
Account Format - Assets on Left and Liabilities and Equity on Right (p. 205)
Report Format - Assets First Followed by Liabilities and Equity (p. 206)
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Balance Sheet Formats and Structure
Current Assets - Converted to Cash or Used in Operation in One Year or Normal Operating Cycle
Listed in Order of Liquidity
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Balance Sheet Formats and Structure
Cash (All Forms) Marketable Securities Receivables Inventories Prepaid Expenses
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Noncurrent Assets
Noncurrent Receivables - not expected to be collected within one year - owners are shown separate
Investments - securities, land not in use, and affiliate advances not to be collected within one year
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Noncurrent Assets
Property and Equipment - Fixed Assets, Capital Leases - Less accumulated depreciation
Smallwares - New USOA Recommends to Expense or Write off Over 3 Years
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Noncurrent Assets
Other Assets - Deferred Charges, Security Deposits
Preopening Expenses - New USOA Recommends to Expense in Current Period
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Other Assets
Goodwill Cash Surrender Value of Life Insurance Deferred Charges Possibly Deferred Income Taxes
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Balance Sheet Formats and Structure
Current Liabilities - Obligations expected to be Satisfied in One Year or Normal Operating Cycle
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Current Liability Presentation
Payables Advance Deposits Current Maturities of Long Term Debts Dividends Payable Income Taxes Payable
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Long Term Liabilities Obligations Beyond One Year Notes Payable Mortgages Payable Bonds Payable Capitalized Lease Obligations Possibly Deferred Income Taxes
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Owners’ Equity Preferred Stock, Par @ $$$ Shares Authorized Shares Issued Common Stock, Par @ $$$ Shares Authorized Shares Issued
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Owners’ Equity
Treasury Stock Additional Paid in Capital Retained Earnings
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Owners’ Equity
Sole Proprietorship Capital Partnership - Show Each Owner’s Capital Withdrawal Accounts
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Footnotes
Significant Accounting Policies Accounts and Notes Receivable Inventories Investments
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Footnotes
Property and Equipment Current Liabilities Long Term Debt Capital Stock Employee Benefit Plans
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Footnotes
Leases Segments of Business Supplemental Financial Information Commitment/Contingent Liability Income Taxes
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Balance Sheet Analysis Common Size Statements or Vertical Analysis Total Assets Equal 100% Total Liabilities and Equity Equals 100% Each Individual Account is Shown as a Percentage
of the Total Assets Compare to Industry, Like Businesses or Self
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Balance Sheet AnalysisAssetsCash 10,000 10%A/R 20,000 20%Building 70,000 70% Total Assets 100,000 100%
Liabilities & EquityLiabilitiesAccounts Payable 10,000 10%Mortgage Payable 80,000 80%Owners Equity 10,000 10% Total Liab. & Equity 100,000 100%
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Homework Chapter 6
Problem 3 Problem 4 Problem 7