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45 Cards in this Set
- Front
- Back
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ABC Inventory System
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management system that concentrates attention on the A category of items, which are few in number but have high costs per unit.
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Accelerated Depreciation
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a method of determining depreciation to increase depreciation expense in turn lowering tax liabilities in the early years in the life of an asset.
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Accept/Reject
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capital budgeting decision problem in which one chooses to acquire or not to acquire a single asset, there being no alternative assets under consideration.
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Accounting Cycle
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the process of recording, summarizing, and reporting financial transactions.
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Accounts Receivable
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current asset, created in the course of doing business, consisting of revenues recognized, but not yet collected as cash.
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Accrual Principle
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the accounting principle that requires that revenues are recognized at the time the associated service is provided, and that expenses are recognized at the time the associated service is received.
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Acquisition
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purchase of one org. by another.
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Activity-based costing
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cost accounting system that identifies cost drivers, activities that produce costs, and allocates indirect costs on the basis of associated cost drivers.
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Actuarially expected cost of care
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the expected cost of providing health care to an individual or to a population based on prices of health care inputs, customary treatments, and risks to health status.
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Actuary
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one trained in the use of quantitative methods to assess risks of hazard and to estimate expected losses due to those risks.
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Adjusted Book Value
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the approach to valuation that uses the values of assets as recorded in the org's financial statements.
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Agency Cost
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reduction in the value of an org. due to the presence of agency problems within it.
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Agency Problem
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an opportunity, arising from an agency relationship, for an agency to benefit at the expense of the principal in whose interest he or she is supposed to act.
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Agency Relationship
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a relationship in which one party acts on behalf of another.
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Annuity
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a stream of equal payments, equally spaced over time.
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Antitrust Regulation
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body of American law forbidding combinations in restraint of trade.
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Appraisal
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the process and any of several methods for establishing the market values of assets.
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Arbitrage Pricing Theory
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model of security pricing that uses securities' sensitivities to multiple factors as the bases for returns.
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Arbitrage Profit
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profit that is possible when the law of one price is violated.
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Asset
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an item owned by the org.
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Asset/equity ratio
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ratio of total assets to owners' equity.
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Auditors
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those practicing the branch of accounting that verifies that financial statements have their basesin verifiable fact, and that they accurately reflect the position of the org., according to GAAP.
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Auditor's opinion
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a statement that guarantees GAAP were used to prepare the audit.
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Balance Sheet
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financial statement showing the equality between the org's assets and its liabilities and owners' equity at the end of the accounting period.
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Bank Note
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short-term (usually 90 days) loan from a commerical bank; principal and interest are due on the maturity date.
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Bankruptcy Costs
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reductions in the total value of the firm due to bankruptcy proceedings.
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Basic Accounting Equation
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assets equal liabilities plus owners' equity.
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Best efforts basis
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agreement between an investment bank and an issuer of securities in which the bank agrees to do its best to sell the securities for their par value, but makes no guarantee that it can.
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Beta
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the sensitivity of returns for an individual security to changes in the market's return premium over the risk-free rate of interest.
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Bond
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a security sold to a lender, promising regular interest payments and repayment of principal, in exchange for the loan in the present.
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Bond counsel
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law firm that certifies, to the best of its knowledge, that an issue of municipal bonds is in fact tax-exempt.
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Bond covenant
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the contract specifying the obligations of a bond's issuer to its purchasers.
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Bond insurance
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insurance contract that guarantees that the bond holders will receive their scheduled payments, even if the issuer defaults.
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Bottom-up budgeting
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budget process in which a great deal of information flows from responsibility centers to the CFO.
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Broker
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an individual or institution making securities purchases and sales as an agent for members of the public.
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Budget
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a plan for revenues and expenditures for a budget period; coverts goals and objectives into targets for revenue and spending.
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Budgeting
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the process of converting the org's operating plan into revenue, expense, and cash flow projections.
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Budget Period
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the period of time for which a budget is prepared, often one fiscal year.
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Capital
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assets whose expected useful lines are longer than 1 year; also, funds for the purchase of such assets.
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Capital Asset Pricing Model (CAPM)
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model of security pricing that uses securities sensitivities to the market's return premium over the risk-free rate as the basis for returns.
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Capital Budget
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the plan for expenditures for assets whose expected useful life is longer than 1 year.
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Capital Budgeting
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process of selecting long-lived assets according to financial decision rules.
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Capital Market
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the market for long-term funds.
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Capital market line
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the ray, in risk-return space, extending from the risk-free rate of interest through the risk-return coordinates of the market portfolio and beyond.
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Capital rationing
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capital budgeting problem in which the best subset of possible projects is to be selected for the expenditure of a fixed amount of money.
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