Business 101 Exam 1

Front 1

economics

Back 1

study of how society chooses to employ resources to produce goods and services and distribute them for consumption

Front 2

microeconomics

Back 2

looks at behavior of people and organizations in particular markets

Front 3

macroeconomics

Back 3

looks at the operation of a nation's economy as a whole

Front 4

resource development

Back 4

study of how to increase resources and to create the conditions that will make better use of them

Front 5

invisible hand

Back 5

coined by adam smith to describe the process that turns self directed gain into social and economic benefits for all

Front 6

capitalism

Back 6

economic system in which all factors of productions and distribution are privately owned and operated for profit

Front 7

supply

Back 7

quantity of products that manufacturers or owners are willing to sell at different prices at a specific time

Front 8

demand

Back 8

quantity that people are wiling to buy at different prices at a specific time

Front 9

market price

Back 9

price determined by supply and demand

Front 10

perfect competition

Back 10

degree of competition in which there are many sellers in a market and none is large enough to dictate the price of a product

Front 11

monopolistic competition

Back 11

degree of comp. in which a large number of sellers produce very similar products that buyers nevertheless perceive as different

Front 12

oligopoly

Back 12

a degree of comp. in which just a few sellers dominate the market

Front 13

monopoly

Back 13

degree of comp. in which only one seller controls the total supply of a product or service and sets the price

Front 14

socialism

Back 14

economic system based on the premise that some/most basic businesses should be owned by the government so that profits can be more evenly distributed among the people

Front 15

brain drain

Back 15

loss of the best and brightest people to other countries

Front 16

communism

Back 16

economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production

Front 17

free-market economics

Back 17

economic systems in which the market largely determines what goods and services get produced, who gets them, and how the economy grows

Front 18

command economics

Back 18

economi systems in which the government largely decides what goods and services get produced, who gets them, and how the economy grows

Front 19

mixed economies

Back 19

economic systems in which some allocation of resources is made by the market and some by the government

Front 20

gross domestic profit

Back 20

total value of final goods and services produced in a country in a given year

Front 21

unemployment rate

Back 21

number of civilians at least 16 years old who are unemployed and tried to find a job within the prior four weeks

Front 22

inflation

Back 22

general rise in the prices of goods and services over time

Front 23

disinflation

Back 23

situation in which price increases are slowing (infl. rate is declining)

Front 24

deflation

Back 24

situation in which prices are declining

Front 25

stagflation

Back 25

situation when the economy is slowing but prices are going up anyway

Front 26

consumer price index

Back 26

monthly statistics that measure the pace of inflation or deflation

Front 27

producer price index

Back 27

index that measures prices at the wholesale level

Front 28

business cycles

Back 28

periodic rises and falls that occur in economies over time

Front 29

recession

Back 29

two or more consecutive quarters of decline in GDP

Front 30

depression

Back 30

severe recession, usually accompanied by deflation

Front 31

fiscal policy

Back 31

federal government's efforts to keep the economy stable by increasing or decreasing taxes or government spending

Front 32

national debt

Back 32

the sum of government deficits over time

Front 33

keynesian economic theory

Back 33

theory that a government policy of increasing spending and cutting taxes could stimulate the economy in a recession

Front 34

monetary policy

Back 34

the management of the money supply and interest rates by the federal reserve

Front 35

accounting

Back 35

recording, classifying, summarizing, and interpreting of financial events and transactions to provide management and other interested parties the information they need to make good decisions

Front 36

managerial accounting

Back 36

accounting used to provide information and analyses to managers inside the organization to assist them in decision making

Front 37

certified management accountant

Back 37

professional accountant who has met certain educational and experience requirements, passed a qualifying exam, and been certified by the institute of certified management accountants

Front 38

financial accounting

Back 38

accounting information and analyses prepared for people outside the organization

Front 39

annual report

Back 39

yearly statement of the financial condition, progress, and expectations of and organization

Front 40

private accountant

Back 40

accountant who works for a single firm, government agency, or nonprofit organization

Front 41

public accountant

Back 41

accountant who provides accounting services to individuals or businesses on a fee basis

Front 42

certified public accountant

Back 42

accountant who passes a series of examinations established by the american institute of certifies public accountants

Front 43

auditing

Back 43

job of reviewing and evaluating the information used to prepare a company's financial statements

Front 44

independent audit

Back 44

evaluation and unbiased opinion about the accuracy of a company's financial statements

Front 45

certified internal auditor

Back 45

an accountant who hasa bachelor's degree and two years of experience internal auditing, and who has passed an exam administered by the institute of internal auditors

Front 46

tax accountant

Back 46

accountant trained in tax law and responsible for preparing tax returns or developing tax strategies

Front 47

government and not-for-profit accounting

Back 47

accounting system for organizations whose purpose is not generating a profit but serving ratepayers, taxpayers, and others according to a duly approved budget

Front 48

accounting cycle

Back 48

six step procedure that results in the preparation and analysis of the major financial statements

Front 49

bookkeeping

Back 49

the recording of business transactions

Front 50

journal

Back 50

the record book or computer program where accounting date are first entered

Front 51

double-entry bookkeeping

Back 51

practice of writing every business transaction in two places

Front 52

ledger

Back 52

specialized accounting book or computer program in which information from accounting journals is accumulated into specific categories and posted so that managers can find all the information about one account in the same place

Front 53

trial balance

Back 53

summery of all the financial data in the account ledgers that ensures the figures are correct and balanced

Front 54

financial statement

Back 54

summary of all transactions that have occurred over a particular period

Front 55

financial accounting equation

Back 55

assets=liabilities + owners equity - basis for balance sheet

Front 56

balance sheet

Back 56

financial statement that reports a firms financial condition at a specific time and is composed of three major accounts: assets, liabilities, and owner's equity

Front 57

assets

Back 57

economic resources owned by a firm

Front 58

liquidity

Back 58

the ease with which an asset can be converted into cash

Front 59

current assets

Back 59

items that can or will be converted into cash within one year

Front 60

fixed assets

Back 60

assets that are relatively permanent, such as land, buildings, and equipment

Front 61

intangible assets

Back 61

long-term assets (patents, trademarks, copyrights) that have no real physical form but do have value

Front 62

liabilities

Back 62

what the business owes to others (debts)

Front 63

accounts payable

Back 63

current liabilities are bills the company owes to other for merchandise or services purchased on credit but not yet paid for

Front 64

notes payable

Back 64

short-term or long-term liabilities that a business promises to repay by a certain date

Front 65

bonds payable

Back 65

long-term liabilities that represent money lent to the firm that must be paid back

Front 66

owners' equity

Back 66

amount of the business that belongs to the owners minus any liabilities owed by the business

Front 67

retained earnings

Back 67

accumulated earnings from a firm's profitable operations that were reinvested in the business and not paid out to stockholders in dividends

Front 68

income statement

Back 68

financial statement that shows a firm's profit after costs, expenses, and taxes; it summarizes all of the resources that have come into the firm (revenue), all the resources that have left the firm (expenses), and resulting net income or net loss

Front 69

net income or net loss

Back 69

revenue left over after all costs and expenses, including taxes, are paid

Front 70

cost of goods sold/manufactured

Back 70

measure of the cost of merchandise sold or cost of raw materials and supplies used for producing items for resale

Front 71

gross profit margin

Back 71

how much a firm earned by buying or making and selling merchandise

Front 72

operating expenses

Back 72

costs involved in operating a business, such ascent, utilities, and salaries

Front 73

depreciation

Back 73

the systematic write-off of the cost of a tangible asset over its estimated useful life

Front 74

statement of cash flows

Back 74

financial statement that reports cash receipts and disbursements related to a firm's three major activities: operations, investments, and financing

Front 75

cash flow

Back 75

the difference between cad coming in and cash going out of a business

Front 76

ratio analysis

Back 76

assessment of a firm's financial condition using calculations and interpretations of financial ratios developed from the firm's financial statements

Front 77

finance

Back 77

function in a business that acquires funds for the firm and manages those funds within the firm

Front 78

financial management

Back 78

job of managing a firm's resources so it can meet it's goals and objectives

Front 79

financial managers

Back 79

managers who examine financial data prepared by accountants and recommend strategies for improving the financial performance of the firm

Front 80

short-term forecast

Back 80

forecast that predicts revenues, costs, and expenses for a period of one year or less

Front 81

cash flow forecast

Back 81

forecast that predicts the cash inflows and outflows in future period, usually months or quarters

Front 82

long-term forecast

Back 82

forecast that predicts revenues, costs, and expenses for a period longer than 1 year, and sometimes as far as 5 or 10 years

Front 83

budget

Back 83

financial plan that sets forth managements expectations and, on the basis of those expectations, allocates the use of specific resources throughout the firm

Front 84

capital budget

Back 84

budget that highlights a firm's spending plans for major asset purchases that often require large sums of money

Front 85

cash budget

Back 85

budget that estimates cash inflows and outflows during a particular period like a month or a quarter

Front 86

operating/master budget

Back 86

budget that ties together the firm's other budgets and summarizes its proposed financial activities

Front 87

financial control

Back 87

a process in which a firm periodically compares its actual revenue, costs, and expenses with its budget

Front 88

capital expenditures

Back 88

major investments in either tangible long-term assets such as land, buildings, and equipment or intangible assets such as patents, trademarks,and copyrights

Front 89

debt financing

Back 89

funds raised through various forms or borrowing that must be repaid

Front 90

equity financing

Back 90

money raised from within the firm, from operations or through the sale of ownership in the firm (stock or venture capital)

Front 91

sort-termfinancing

Back 91

funds needed for a year or less

Front 92

long-term financing

Back 92

funds needed for more than a year

Front 93

trade credit

Back 93

the practice of buying goods and services now and paying for them later

Front 94

promissory note

Back 94

written contract with a promise to pay a supplier a specific sum of money at a definite time

Front 95

secured loan

Back 95

a loan backed by collateral, something valuable such as property

Front 96

unsecured loan

Back 96

loan that doesn't require any collateral

Front 97

line of credit

Back 97

given amount of unsecured short-term funds a bank will lend to a business, provided the funds are readily available

Front 98

revolving credit agreement

Back 98

line of credit that's guaranteed but usually comes with a fee

Front 99

commercial finance companies

Back 99

organizations that make short-term loans to borrowers who offer tangible assets as collateral

Front 100

factoring

Back 100

process of selling accounts receivable for cash

Front 101

commercial paper

Back 101

unsecured promissory notes of $100,000 and up that mature in 270 days or less

Front 102

term-loan agreement

Back 102

promissory note that requires the borrower to repay the loan in specified installments

Front 103

risk/return trade-off

Back 103

principle that the greater the risk a lender takes in making a loan, the higher the interest rate required

Front 104

indenture terms

Back 104

terms of agreement in a bond issue

Front 105

secured bond

Back 105

bond issued with some form of collateral

Front 106

unsecured bond

Back 106

bond backed only by the reputation of the issuer; also called a debenture bond

Front 107

venture capital

Back 107

money that is invested in new or emerging companies that are perceived as having great profit potential

Front 108

leverage

Back 108

raising needed funds through borrowing to increase a firm's rate of return

Front 109

cost of capital

Back 109

the rate of return a company must earn in order to meet the demands of its lenders and expectations of its equity holders