ACCOUNTING TERMS - ACCOUNTING DICTIONARY - ACCOUNTING GLOSSARY
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CUT-OFF is designating a point of termination. An auditor uses tests of cutoff to obtain evidence that transactions for each year are included in the financial statements of the appropriate year.
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FIXED ASSET TURNOVER measures managements ability to generate revenues from investments in fixed assets. FAT considers only the firms investment in property, plant and equipment and is extremely important in high asset firms such as manufactures and telecommunications companies. Generally, the higher this ratio:
- the smaller the investment required to generate sales, thus the more profitable the firm.
- indicates the firm has less money tied up in fixed assets for each dollar of sales revenue.
A declining ratio may indicate that the firm has over-invested in plant, equipment, or other fixed assets. Formula: Net Revenues / Fixed Assets
EXISTENCE, in accounting, deals with whether assets or liabilities exist at a given date. For example, management asserts that finished goods inventories in the balance sheet are available for sale.