Financial Accounting Meigs And Meigspdf Exclusive -

Unlocking the Gold Standard: The Exclusive Guide to Financial Accounting by Meigs and Meigs (PDF)

2. Inventory Costing Methods

When prices fluctuate, how do you know which item cost what? Meigs outlines three main methods (assuming you don't track specific serial numbers):

• FIFO (First-In, First-Out): Assumes the oldest items sell first. (Net income is higher in times of inflation).
• LIFO (Last-In, First-Out): Assumes the newest items sell first. (Net income is lower in inflation, tax benefits).
• Average Cost: A weighted average of all costs.

Stockholders’ Equity

• Common Stock: Basic ownership. Voting rights.
• Preferred Stock: Special privileges (dividends guaranteed), usually no voting rights.
• Dividends: Distribution of retained earnings to shareholders. Note: Dividends are an expense to the company? No. They are a distribution of profit.

Chapters 11-13: Long-Term Assets & Liabilities

• Depreciation methods (Straight-line, Double-declining balance).
• Bonds payable and present value concepts.

Chapters 8-10: Internal Control & Receivables

• Sarbanes-Oxley Act implications.
• Allowance method for bad debts.

Ratio Analysis

Use these formulas to judge company health: financial accounting meigs and meigspdf exclusive

1. Current Ratio (Liquidity): Current Assets / Current Liabilities.
   • Measures: Ability to pay short-term debts. (Standard is usually 2:1).
2. Debt Ratio (Solvency): Total Liabilities / Total Assets.
   • Measures: Percentage of assets financed by debt. Lower is safer.
3. Return on Assets (ROA) (Profitability): Net Income / Average Total Assets.
   • Measures: How efficiently management uses assets to generate profit.
4. Profit Margin: Net Income / Net Sales.
   • Measures: How much profit is made per dollar of sales.