Business - Chapter 14

Front 1

Accounting

Back 1

The recording, measurment and interpretation of financial information
-used in makeing business decisions

Front 2

The Financial Accounting Standards Board

Back 2

Sets principles of financial accounting and reporting
-can be difficult and contentious science

Front 3

GAAP

Back 3

Generally accepted accounting principles

Front 4

SEC

Back 4

Securities and exchange commision provides oversight
-has assumed a larger oversight role in recent years

Front 5

Certified Publiv Accountant (CPA)

Back 5

An independent professional who provides accounting services to the public (indiviuals or firms) for a fee

Front 6

Private Accounting

Back 6

An accounting employed by a corporation, government agency, or other organization
-can be CPAs and CMAs (cerified managment accountant)

Front 7

Forensic Accounting

Back 7

Analyzing financial data in seatch for faudulent entries or financial misconduct

Front 8

Bookkeeping

Back 8

Responsible for obtaining and recording the information that accountants require to analyze a firm’s financial position

Front 9

Accountants

Back 9

Understand, interpret, and develop sophisticated accounting systems neccessary to classify and analyze complex finanical informmation

Front 10

Managerial Accounting

Back 10

Internal uses - cash flow and budget

Front 11

Financial Accounting

Back 11

External uses - reporting financial performance to outsides, filing income taxes, obtaining credit, reporting to stockholders

Front 12

Mangerial Accounting

Back 12

Internal use of accounting statements by mangers in planning and directing organizational activities

Front 13

Cash flow

Back 13

movement of money through an organization
-mangment's greatest concern

Front 14

Accounting helps mangament do what?

Back 14

Prepare a budget, an internal financial plan that forcasts expenses and income over a set of period of time

Front 15

External Accounting Information

Back 15

Reporting in IRS, annual report, obtaining credit, gauge of performance

Front 16

Assets

Back 16

Things that the firms owns

Front 17

Liabilies

Back 17

All debts and obligations owned by a business to outside creditors, suppliers, or other vendors

Front 18

The Accounting Cycle

Back 18

1. Examining source documents
2. Recording transactions
3.Posting transactions
4.Preparing financial statements

Front 19

The end result of the accounting process are a series of of financial statements

Back 19

Income statment
Balace sheet
Statement of cash flow

Front 20

A financial report that shows an organization's overall profitablity or loss over a period of time

Back 20

Month
Quarter
Year

Front 21

Revenue

Back 21

The total amount of money recieved or promised from a sale of good/services and other activities

Front 22

Cost of goods sold

Back 22

The amound of money a firm spent to buy and produce the products it sold

Front 23

Gross income/profit

Back 23

Revenues minus the cost of goods sold

Front 24

Expenses

Back 24

The cost incured to day-to-day operations of an organization

Front 25

Depreciation

Back 25

A special type of expense included in general and administrative category
-Involves spreading the costs of long-lived assets over the total number of accounting periods in which they are to be used

Front 26

Net Income

Back 26

Total profit or loss after all expenses are deducted from revenue
-Accountants usually divide profits into subcategories (e.g. operating income)

Front 27

The Balance Sheet

Back 27

A “snapshot” of an organization’s financial position at a given moment
-Presents an accumulation of all the company’s transactions since it began
-Shows what an organization owns and controls and sources of income used to pay for assets

Front 28

Current Assets (Short-Term Assets)

Back 28

Used or converted to cash within a calendar year

Front 29

Accounts Revieable

Back 29

Money owed the company by clients or customers who have promised to pay at a later date
-accountants usually include an allowance for bad debts, which the firm does not expect to collect

Front 30

Long-Term Assets (Fixed Assets)

Back 30

Represent a commitment of funds for more than a year
-tangible and intangible assets

Front 31

Current Liabilities

Back 31

Obligations to shot-term creditors

Front 32

Accounts Payable

Back 32

Amounts owed to suppliers for goods and services purchased on credit

Front 33

Accrued Expenses

Back 33

All unpaid financial obligations incurred by the company

Front 34

Owner's Equity

Back 34

All the owners’ contributions to the organization, along with income earned by the organization, retained for financing growth and development

Front 35

Statement of Cash Flow

Back 35

Explains how the company's cash changed from the beginning of the accounting period to the end
-Takes the cash balance from two successive balance sheets and compares them
-Change in cash explained in three catergories;
cash from operating activities
cash from investing activities
cash from financing activities

Front 36

Ratio Analysis

Back 36

Calculations that measure an organization's financial health
profitbalilty ratios, asset utilization ratios, liquidity ratios, debt utilization ratios, per share data

Front 37

Profitablitiy ratio

Back 37

Measures the amount of operating income or net income an organization is able to generate relative to its assets, owners equity, and sales

Front 38

Profit Margin =

Back 38

Net Income/Sales

Front 39

Return on Assets =

Back 39

Net Income/Assets

Front 40

Return on Equity =

Back 40

Net Income/Equity

Front 41

Asset Utilization Ratios

Back 41

Measures how well a firm uses its assets to generate each $1 of sale

Front 42

Receivables Turnover =

Back 42

Sales (Total Net Revenues)/Receivables

Front 43

Inventory Turnover =

Back 43

Sales/Inventory

Front 44

Total Asset Turnover =

Back 44

Sales/Total Assets

Front 45

Business collects its recievables how many timer per year?

Back 45

32

Front 46

Business replaces its inventory hoe many times per year?

Back 46

13.6

Front 47

Liquidity Ratios

Back 47

Meausures the speed with which the company can turn its assets into cash to meet short-term debt

Front 48

Current Ratio =

Back 48

Current Assets/Current Liabilities

Front 49

Quick Ratio =

Back 49

Current Assets - Inventory/Current Liabilities

Front 50

Debt Utlization Ratio

Back 50

Measures how much debt an orgainzation is relative to other sources of capital, such as owners' equity

Front 51

Debt to Total Assets =

Back 51

Debts (total liabilities)/Total Assets

Front 52

For every $1 of business’s total assets, nearly 57.3% is financed with debt. The remaining 42.7% is provided by owner’s equity.

Back 52

True

Front 53

Earnings Per Share =

Back 53

Net Income/Number of Shares Outstanding

Front 54

Dividends per Share =

Back 54

Dividends paid/Number of Shares Outstanding