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Company prepared
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Internal accountant
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Lowest level
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Compiliation
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3rd party preparer
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More comfort
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Review
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CPA
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Higher level of comfort
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Audit
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CPA
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Highest level of comfort
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Balance sheet
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Shows assets owned, liabilities owed & shareholder equity at a point in time
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Income statement
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Summarizes operating transactions for a period of time
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Statement of Cash flows
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Shows cash inflows & outflows for period of time (operating, investment or financing)
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Flash Report (optional)
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1 page report showing key performance indicators
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Process all transactions completely & effectively
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Report transactions accurately, reliably, in timely manner
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Comply with laws and regulations
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Faithful representation
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Verifiable
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Comparable with prior periods
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Relevant
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Understandable
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Timely
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DEBIT
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CREDIT
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Assets
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Liabilities
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Expenses
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Income / revenue
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Distributions / owners drawing
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Capital injection
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GAAP - generally accepted accounting principles (accrual basis, current regulations, subject to change)
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Accrual basis - recognizes business revenue and matching transactions when they happen
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Cash basis (not Gaap)- recognizes revenue and expenses when paid
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Current Ratio
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Current assets / current liabilities
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Ability to meet short term obligations
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Quick Ratio
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CA - inventory / ciurrent liabilities
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Ability to meet short term obligations with most liquid assets
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A/R Days
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A/R / Sales * # days in period
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Average collection period for sales
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Inventory Days
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Inv / COGS * # days in period
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Average days company holds inventory before selling it.
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A/P Days
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AP / COGS * # days in period
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Average number of days of credit company shows
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Working capital cycle days
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Days in A/R + Days in Inv - Days in A/P
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# days to convert working capital into revenue
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Debt to Equity Ratio
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Total Liabilities / Total Equity
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Measure degree company is financing oiperaitons with debt rather than equity
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Interest Coverage Ratio
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EBIT / interest
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Ability to meet ingterest obligations.
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Debt Ratio
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Total liabilities / Total assets
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Extent to swhich company uses external financing to finace assets
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Funded debt to EBITDA Ratio
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Funded Debt / EBITDA
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Ability to meet funded obligations before covering tax, depreciation, and interst expense
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Gross profit margin
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(Sales - variable COGS - fixed COGS) / Sales
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Margin after paying direct costs of doing business (labor, materials and direct production costs)
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Operating profit margin
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Gross profit - SG&A expenses
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Margin after paying SG&A expenses
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Pretax profit margin
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Operating profit - interest +/- other income or expenses
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Profit margin after paying all expenses of business (except income taxes)
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EBITDA Margin
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NI + depr + Int + taxes / Sales
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Margin before depr, interest, and taxes
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