hft 2403 chapter 6 the balance sheet questions answered by balance sheet amount of cash on hand?...
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HFT 2403HFT 2403
Chapter 6Chapter 6
The Balance SheetThe Balance Sheet
Questions Answered by Questions Answered by Balance SheetBalance Sheet
Amount of Cash on Hand?Amount of Cash on Hand? What is the Total Debt?What is the Total Debt? What is Funding Mix?What is Funding Mix? How Much is Owed to the Hotel?How Much is Owed to the Hotel?
Questions Answered by Questions Answered by Balance SheetBalance Sheet
What are the Tax Liabilities?What are the Tax Liabilities? Can Current Debt be Paid?Can Current Debt be Paid? What is the Financial Strength?What is the Financial Strength? How Much have Stockholders How Much have Stockholders
Invested in the Assets?Invested in the Assets?
Purposes of the Balance Purposes of the Balance SheetSheet
The Income Statement: Pertains to a The Income Statement: Pertains to a period of timeperiod of time
The Balance Sheet – Pertains to a given The Balance Sheet – Pertains to a given datedate
Primarily use by creditors and investorsPrimarily use by creditors and investors Used quite a bit for various ratio Used quite a bit for various ratio
analysis to monitor the overall “health” analysis to monitor the overall “health” of the businessof the business
LiquidityLiquidity
The ability of the operation to The ability of the operation to convert assets to cash to meet convert assets to cash to meet current liabilitiescurrent liabilities
Current Ratio- Used by creditor and Current Ratio- Used by creditor and investorsinvestors Current Assets / Current LiabilitiesCurrent Assets / Current Liabilities
s/b around 2 : 1s/b around 2 : 1
Balance Sheet LimitationsBalance Sheet Limitations
Does Not Reflect Current Values of Does Not Reflect Current Values of Assets (Booked According to Cost Assets (Booked According to Cost Principle)Principle)
Does Not Include Some Things of Does Not Include Some Things of Value Such as Personnel, Location, Value Such as Personnel, Location, Customer Base, GoodwillCustomer Base, Goodwill
Numbers are of a Static NatureNumbers are of a Static Nature
Balance Sheet LimitationsBalance Sheet Limitations
Becomes Quickly OutdatedBecomes Quickly Outdated Some Account Balances are Some Account Balances are
Estimates Such as Depreciation and Estimates Such as Depreciation and Estimates for Uncollectibles – Based Estimates for Uncollectibles – Based on Best Judgmenton Best Judgment
Balance Sheet - The Balance Sheet - The Statement of Financial Statement of Financial
PositionPosition
Assets = Liabilities + EquityAssets = Liabilities + Equity Statement of Assets, Liabilities, and Statement of Assets, Liabilities, and
Owners’ Equity at a Point in TimeOwners’ Equity at a Point in Time
Balance Sheet - The Balance Sheet - The Statement of Financial Statement of Financial
PositionPosition
AssetsAssets
Current AssetsCurrent Assets
Noncurrent ReceivablesNoncurrent Receivables
InvestmentsInvestments
Property and EquipmentProperty and Equipment
Other AssetsOther Assets
Balance Sheet - The Balance Sheet - The Statement of Financial Statement of Financial
PositionPosition
LiabilitiesLiabilities
Current LiabilitiesCurrent Liabilities
Long Term DebtLong Term Debt
Deferred Income TaxesDeferred Income Taxes
Commitments / ContingenciesCommitments / Contingencies
Other Long-Term LiabilitiesOther Long-Term Liabilities
Balance Sheet - The Balance Sheet - The Statement of Financial Statement of Financial
PositionPosition
Owners’ EquityOwners’ Equity
Capital StockCapital Stock
Additional Paid In CapitalAdditional Paid In Capital
Retained EarningsRetained Earnings
Treasury StockTreasury Stock
Balance Sheet Formats and Balance Sheet Formats and StructureStructure
Account Format - Assets on Left and Account Format - Assets on Left and Liabilities and Equity on Right (p. Liabilities and Equity on Right (p. 205)205)
Report Format - Assets First Followed Report Format - Assets First Followed by Liabilities and Equity (p. 206)by Liabilities and Equity (p. 206)
Balance Sheet Formats and Balance Sheet Formats and StructureStructure
Current Assets - Converted to Cash Current Assets - Converted to Cash or Used in Operation in One Year or or Used in Operation in One Year or Normal Operating Cycle Normal Operating Cycle
Listed in Order of Liquidity Listed in Order of Liquidity
Balance Sheet Formats and Balance Sheet Formats and StructureStructure
Cash (All Forms)Cash (All Forms) Marketable SecuritiesMarketable Securities ReceivablesReceivables InventoriesInventories Prepaid ExpensesPrepaid Expenses
Noncurrent AssetsNoncurrent Assets
Noncurrent Receivables - not Noncurrent Receivables - not expected to be collected within one expected to be collected within one year - owners are shown separateyear - owners are shown separate
Investments - securities, land not in Investments - securities, land not in use, and affiliate advances not to be use, and affiliate advances not to be collected within one yearcollected within one year
Noncurrent AssetsNoncurrent Assets
Property and Equipment - Fixed Property and Equipment - Fixed Assets, Capital Leases - Less Assets, Capital Leases - Less accumulated depreciationaccumulated depreciation
Smallwares - New USOA Smallwares - New USOA Recommends to Expense or Write off Recommends to Expense or Write off Over 3 YearsOver 3 Years
Noncurrent AssetsNoncurrent Assets
Other Assets - Deferred Charges, Other Assets - Deferred Charges, Security DepositsSecurity Deposits
Preopening Expenses - New USOA Preopening Expenses - New USOA Recommends to Expense in Current Recommends to Expense in Current Period Period
Other AssetsOther Assets
GoodwillGoodwill Cash Surrender Value of Life Cash Surrender Value of Life
InsuranceInsurance Deferred ChargesDeferred Charges Possibly Deferred Income TaxesPossibly Deferred Income Taxes
Balance Sheet Formats and Balance Sheet Formats and StructureStructure
Current Liabilities - Obligations Current Liabilities - Obligations expected to be Satisfied in One Year expected to be Satisfied in One Year or Normal Operating Cycleor Normal Operating Cycle
Current Liability Current Liability PresentationPresentation
PayablesPayables Advance DepositsAdvance Deposits Current Maturities of Long Term Current Maturities of Long Term
DebtsDebts Dividends PayableDividends Payable Income Taxes PayableIncome Taxes Payable
Long Term LiabilitiesLong Term Liabilities
Obligations Beyond One YearObligations Beyond One Year Notes PayableNotes Payable Mortgages PayableMortgages Payable Bonds PayableBonds Payable Capitalized Lease ObligationsCapitalized Lease Obligations Possibly Deferred Income TaxesPossibly Deferred Income Taxes
Owners’ EquityOwners’ Equity
Preferred Stock, Par @ $$$Preferred Stock, Par @ $$$ Shares AuthorizedShares Authorized Shares IssuedShares Issued Common Stock, Par @ $$$Common Stock, Par @ $$$ Shares AuthorizedShares Authorized Shares IssuedShares Issued
Owners’ EquityOwners’ Equity
Treasury StockTreasury Stock Additional Paid in CapitalAdditional Paid in Capital Retained EarningsRetained Earnings
Owners’ EquityOwners’ Equity
Sole Proprietorship CapitalSole Proprietorship Capital Partnership - Show Each Owner’s Partnership - Show Each Owner’s
CapitalCapital Withdrawal AccountsWithdrawal Accounts
FootnotesFootnotes
Significant Accounting PoliciesSignificant Accounting Policies Accounts and Notes ReceivableAccounts and Notes Receivable InventoriesInventories InvestmentsInvestments
FootnotesFootnotes
Property and EquipmentProperty and Equipment Current LiabilitiesCurrent Liabilities Long Term DebtLong Term Debt Capital StockCapital Stock Employee Benefit PlansEmployee Benefit Plans
FootnotesFootnotes
LeasesLeases Segments of BusinessSegments of Business Supplemental Financial InformationSupplemental Financial Information Commitment/Contingent LiabilityCommitment/Contingent Liability Income TaxesIncome Taxes
Balance Sheet AnalysisBalance Sheet Analysis Common Size Statements or Common Size Statements or Vertical Vertical
AnalysisAnalysis Total Assets Equal 100%Total Assets Equal 100% Total Liabilities and Equity Equals 100%Total Liabilities and Equity Equals 100% Each Individual Account is Shown as a Each Individual Account is Shown as a
Percentage of the Total AssetsPercentage of the Total Assets Compare to Industry, Like Businesses or Compare to Industry, Like Businesses or
SelfSelf
Balance Sheet AnalysisBalance Sheet Analysis
AssetsAssetsCashCash 10,000 10,000 10%10%A/RA/R 20,00020,000 20%20%BuildingBuilding 70,000 70,000 70%70% Total AssetsTotal Assets 100,000 100% 100,000 100%Liabilities & EquityLiabilities & EquityLiabilitiesLiabilitiesAccounts Payable 10,000Accounts Payable 10,000 10%10%Mortgage Payable 80,000Mortgage Payable 80,000 80%80%Owners EquityOwners Equity 10,000 10,000 10%10% Total Liab. & EquityTotal Liab. & Equity 100,000100,000 100%100%
Homework Chapter 6Homework Chapter 6
Problem 3Problem 3 Problem 4Problem 4 Problem 7Problem 7