Business Final

Front 1

managerial accounting

Back 1

accounting that provides financial information that managers inside the organization can use to evaluate and make decisions about current and future operations

Front 2

financial accounting

Back 2

accounting that focuses on preparing external financial reports that are used by outsiders such as lenders, suppliers, investors, and govt. agencies to assess the financial strength of a business

Front 3

generally accepted accounting principles

Back 3

the financial accounting standards followed by accountants in the US when preparing financial statements

Front 4

Financial Accounting Standards Board

Back 4

the private organization that is responsible for establishing financial accounting standards in the US

Front 5

annual report

Back 5

a yearly document that describes a firms financial status and usually discusses the firm's activities during the past year and its prospects for the future

Front 6

public accountants

Back 6

independent accountants who serve organizations and individuals on a free basis

Front 7

auditing

Back 7

the process of reviewing the records used to prepare financial statements and issuing a formal auditors opinion indicating whether the statements have been prepared in accordance with accepted accounting rules

Front 8

certified public accountant

Back 8

an accountant who has completed and approved bachelor's degree program, passed a test prepared by the American Institute of Certified Public Accountants, and met state requirements. Only a CPA can issue an auditor's opinion on a firm's financial statements

Front 9

private accountants

Back 9

accountants who are employed to serve one particular organization

Front 10

certified management acountant

Back 10

a managerial accountant who has completed a professional certification program, including passing an examination

Front 11

Sarbanes-Oxley Act

Back 11

Act passed in 2002 that sets new standards for auditor independence, financial disclosure and reporting, and internal controls; establishes an independent oversight board; and restricts the types of non audit services auditors can provide audit clients

Front 12

assets

Back 12

things of value owned by a firm

Front 13

liabilities

Back 13

what a firm owes to its creditors; also called debts

Front 14

owners' equity

Back 14

the total amount of investment in the firm minus any liabilities; also called net worth

Front 15

double-entry bookkeeping

Back 15

a method of accounting in which each transaction is recorded as two entries so that two accounts or records are changed

Front 16

balance sheet

Back 16

a financial statement that summarizes a firm's financial position at a specific point in time

Front 17

liquidity

Back 17

the speed with which an asset can be converted to cash

Front 18

current assets

Back 18

assets that can or will be converted to cash within 12 months

Front 19

fixed assets

Back 19

long-term assets used by a firm for more than a year such as land, buildings, and machinery

Front 20

depreciation

Back 20

the allocation of an asset's original cost to the years in which it is expected to produce revenues

Front 21

intangible assets

Back 21

long-term assets with no physical existence, such as patents, copyrights, trademarks, and goodwill

Front 22

current liabilities

Back 22

short-term claims that are due within a year of the date of the balance sheet

Front 23

long-term liabilities

Back 23

claims that come due more than one year after the date of the balance sheet

Front 24

retained earnings

Back 24

the amounts left over from profitable operations since the firm's beginning; equal to total profits minus all dividends paid to stockholders

Front 25

income statement

Back 25

a financial statement that summarizes a firm's revenues and expenses and shows its total profit or loss over a period of time

Front 26

revenues

Back 26

the dollar amount of a firm's sales plus any other income it received from sources such as interest, dividends, and rents

Front 27

gross sales

Back 27

the total dollar amount of a company's sales

Front 28

net sales

Back 28

the amount left after deducting sales discounts and returns and allowances from gross sales

Front 29

expenses

Back 29

the costs of generating revenues

Front 30

cost of goods sold

Back 30

the total expense of buying or producing a firm's goods or services

Front 31

gross profit

Back 31

the amount a company eanrs after paying to produce or buy its products but before deducting operating expenses

Front 32

operating expenses

Back 32

the expenses of running a business that are not directly related to producing or buying its products

Front 33

net profit (net income)

Back 33

the amount obtained by subtracting all of a firm's expenses from its revenues, when the expenses are more than the revenues

Front 34

statement of cash flows

Back 34

a financial statement that provides a summary of the money flowing into and out of a firm during a certain period, typically one year

Front 35

ratio analysis

Back 35

the calculation and interpretation of finacial ratios using data taken from the firm's financial statements in order to assess its condition and performance

Front 36

liquidity ratios

Back 36

ratios that measure a firm's ability to pay its short-term debts as they come due

Front 37

current ratio

Back 37

the ratio of total current assets to total current liabilities; used to measure a firms liquidity

Front 38

acid-test ratio

Back 38

the ratio of total current assets excluding inventory to total current liabilities; used to measure a firm's liquidity

Front 39

net working capital

Back 39

the amount obtained by subtracting total current liabilities from total current assets; used to measure a firm's liquidity

Front 40

profitability ratios

Back 40

ratios that measure how well a firm is using its resources to generate profit and how efficiently it is being managed

Front 41

net profit margin

Back 41

the ratio for net profit to net sales; also called return on sales. it measures the percentage of each sales dollar remaining after all expenses, including taxes, have been deducted

Front 42

return on equity

Back 42

the ratio of net profit to total owner's equity; measures the return that owners reciev on their investment in the firm

Front 43

earnings per share

Back 43

the ratio of net profit to the number of shares of common stock outstanding; measures the number of dollars eraned by each share of stock

Front 44

activity ratios

Back 44

ratios that measure how well a firm uses its assets

Front 45

inventory turnover ratio

Back 45

ratios that measure the speed with which inventory moves through a firm and is turned into sales

Front 46

debt ratios

Back 46

ratios that measure the degree and effect of a firm's use of borrowed funds (debt) to finance its operations

Front 47

debt-to-equity-ratio

Back 47

the ratio of total liabilities to owners' equity; measure the relationship between the amount of debt financing (borrowing) and the amount of equity financing (owners funds)

Front 48

financial management

Back 48

the art and science of managing a firm's money so that it can meet its goals

Front 49

cash flows

Back 49

the inflow and outflow of cash for a firm

Front 50

return

Back 50

the opportunity for profit

Front 51

risk

Back 51

the potential for loss of the chance that an investment will not achieve the expected level of return

Front 52

risk-return trade-off

Back 52

a basic principle in finance that holds that the higher the risk, the greater the return that is required

Front 53

cash management

Back 53

the process of making sure that a firm has enough cash on hand to pay bills as they come due and to meet unexpected expenses

Front 54

marketable securities

Back 54

short-term investments that are easily converted into cash

Front 55

commercial paper

Back 55

unsecured short-term debt--an IOU--issued by a financially strong corporation

Front 56

accounts receivable

Back 56

sales for which a firm has not yet been paid

Front 57

capital expenditures

Back 57

investments in long-lived assets, such as land, buildings, machinery, equiptment, and information services that are expected to provide benefits over a period longer than one year

Front 58

capital budgeting

Back 58

the process of analyzing long-term projects and selecting those that offer the best returns while maximizing the firm's value

Front 59

unsecured loans

Back 59

laons for which the borrower does not have to pledge specific assets as security

Front 60

trade credit

Back 60

the extension of credit by the seller to the buyer between the time the buyer receives the goods or services and when it pays for them

Front 61

accounts payable

Back 61

purchases for which a buyer has not yet paid the seller

Front 62

line of credit

Back 62

an agreement between a bank and a business that specifies the maximum amount of unsecured short-term borrowing the bank will allow the firm over a given period, typically one year

Front 63

revolving credit agreement

Back 63

a guaranteed line of credit whereby a bank agrees that a certain amount of funds will be available for a business to borrow over a given period, typically two to five years

Front 64

secured loans

Back 64

loans for which the borrower is required to pledge specific assets as collateral, or security

Front 65

factoring

Back 65

a form of short-term financing in which a firm sells its accounts receivable outright at a discount to a factor

Front 66

financial risk

Back 66

the chance that a firm will be unable to make scheduled interest and principal payments on its debt

Front 67

term loan

Back 67

a business loan with a maturity of more than one year; can be unsecured or secured

Front 68

bonds

Back 68

long-term debt obligations issued by corporations and governments

Front 69

interest

Back 69

a fixed amount of money paid by the issuer of a bond to the bondholder on a regular schedule, typically every six months; stated as the coupon rate

Front 70

mortgage loan

Back 70

a long-term loan made against real estate as a collateral

Front 71

common stock

Back 71

security that represents an ownership interest in a corporation

Front 72

dividends

Back 72

payments to stockholders from a corporation's profits

Front 73

stock dividends

Back 73

payments made to stockholders in the form of more stock; may replace or supplement cash dividends

Front 74

retained earnings

Back 74

profits that have been reinvested in a firm

Front 75

preferred stock

Back 75

an equity security for which the dividend amount is set at the time the stock is issued and the dividend must be paid before the company can pay dividends to common stockholders

Front 76

securities

Back 76

investment certificates issued by corporations or governments that represent either equity or debt

Front 77

institutional investors

Back 77

investment professionals who are paid to manage other people's money

Front 78

primary market

Back 78

the securities market where new securities are sold to the public

Front 79

secondary market

Back 79

the securities market where old securities are bought and sold or traded among investors; includes broker markets, dealer markets, the over-the-counter market, and the commodities exchanges

Front 80

investment bankers

Back 80

firms that act as intermediaries, buying securities from corporations and governments and reselling them to the public

Front 81

underwriting

Back 81

the process of buying securities from corporations and governments and reselling them to the public; the main activity of investment bankers

Front 82

stockbroker

Back 82

a person who is licensed to buy and sell securities on behalf of clients

Front 83

municipal bonds

Back 83

bonds issued by states, cities, counties, and other state and local government agencies

Front 84

bond ratings

Back 84

letter grades assigned to bond issues to indicate their quality or level of risk; assigned by rating agencies such as Moody's and S&P

Front 85

mutual fund

Back 85

a financial-service company that pools investor's funds to buy a selection of securities that meet its stated investment goals

Front 86

exchange traded fund

Back 86

a security similar to a mutual fund, that holds a broad basket of stocks with a common theme, but trades on a stock exchange so that its price changes throughout the day

Front 87

futures contracts

Back 87

legally binding obligations to buy or sell specified quantities of commodities or financial instruments at an agreed-on price during a specified time

Front 88

broker markets

Back 88

national and regional securities exchanges that bring buyers and sellers together through brokers on a centralized trading floor

Front 89

dealer markets

Back 89

securities markets where buy and sell orders are executied through dealers, or "market makers" linked by telecommunications networks

Front 90

NASDAQ system

Back 90

worlds larges electronic stock market, which is a sophisticated telecommunications network that links dealers throughout the US

Front 91

over-the-counter market

Back 91

markets, other than the exchanges on which small companies trade; includes the OTCBB and the Pink Sheets

Front 92

electronic communications networks

Back 92

private trading networks that allow institutional traders and some individuals to make direct transactions into the fourth market

Front 93

insider trading

Back 93

the use of information that is not available to the general public to make profits on securities transactions

Front 94

circuit brakers

Back 94

a corrective measures that, under certain conditions, stop trading in the securities markets for a short cooling-off period to limit the amount the market can drop in one day