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Bus 101 Final
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169
Business
Undergraduate 1
05/06/2017

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Term
Annual Report
Definition
A yearly statement of the financial condition, progress, and the expectations of an organization. ( able to pay bills? how much debt does a company owe? )
Term
Financial Accounting
Definition
accounting information and analyses prepared for people outside the organization
Term
Certified Management Accountant (CMA)
Definition
professional accountant who has met certain educational and experience requirements, pass a qualifying exam and been certified by the instituted of certified management accountants
Term
Managerial Accounting
Definition
Accounting used to provide information and analyses to managers inside the organization to assist them in decision making
Term
What are the 5 key working areas for the accounting profession?
Definition
1. Managerial
2. Financial
3.Auditing
4.Tax
5. Government/not-for-profit
Term
Auditing
Definition
the job of reviewing and evaluating the information used to prepare a company financial statements
Term
Accounting System
Definition
The method we use to record and summarize accounting data into reports
Term
Accounting
Definition
the recording, classifying, summarizing, interpreting of financial events and transactions to provide management and other interested parties the information they need to make good decisions
Term
Private Accountant
Definition
An accountant who works for a single firm, government agency, or non-profit organization
Term
What is "FASB" and "GAAP"?
Definition
1. Financial Accounting Standards Board
2. Generally accepted Accounting Principles
Term
Certified Public Accountant (CPA)
Definition
An accountant who passes a series of examinations established by the American Institute of Certified Public Accountants ( AICPA)
Term
Public Accountant
Definition
an accountant who provides accounting services to individuals or businesses on a fee basis ( example: H&R Block )
Term
Independent Audit
Definition
An evaluation and unbiased opinion about the accuracy of a company's financial statements ( Annual reports often include an auditor's unbiased written opinion )
Term
Certified Internal Auditor (CIA)
Definition
An accountant who has a bachelor's degree and two years of experience in internal auditing, and who has passed an exam administered by the Institute of Internal Auditors
Term
Tax Accountant
Definition
An accountant trained in tax law and responsible for preparing tax returns for developing strategies
Term
Government and not-for-profit accounting
Definition
Accounting System for organizations whose purpose is not generating a profit but serving rate payers, tax payers, and others according to a duly approved budget
Term
Organizations have operational needs for which they need funds. What are the 4 key areas?
Definition
1. Managing day-to-day needs of the business
2. Controlling credit operations
3. Acquiring needed inventory
4. Making Capital Expenditures
Term
Capital Expenditures
Definition
Major Investments in either tangible long-term assets such as land, buildings, and equipment or intangible assets such as patents, trademarks, and copyrights
Term
List some "Short-Term Funds" (Financing)
Definition
- monthly expenses
- unanticipated emergencies
- cash flow problems
- expansion of current inventory
-temporary promotional programs
Term
List some "Long-Term Funds" (Financing)
Definition
-New Products development
-Replacement of capital equipment
-mergers or acquisitions
-expansion into new markets ( domestic or global)
-new facilities
Term
Debt Financing
Definition
funds, raised through various forms of borrowing that must be repaid
Term
Equity Financing
Definition
Money raised from within the firm, from operations or through the sale of ownership in the firm ( stock of venture capital )
Term
Short-Term Financing
Definition
Funds needed for a year or less
Term
Long-Term Financing
Definition
Funds needed for more than a year (usually 2 to 10 years)
Term
Trade Credit
Definition
The practice of buying goods and services now and paying for them later
Term
Promissory Note
Definition
A Written contract with a promise to pay a supplier a specific sum of money at a definite time
Term
What are some companies they reply heavily on "trade credit"?
Definition
-United Parcel Service
-Kmart
-Macy's
Term
What is a reason a organization would have to sign a "promissory note"?
Definition
they may lack credit history, have a history of slow payments, or poor credit rating.
Term
Instead of a small firm asking for money from friends or family, where else can they ask for money when they need short-term funds or to borrow money?
Definition
Commercial Banks, they will fully understand the businesses risk and can help analyze its future financial needs rather than borrow from friends or relatives.
Term
Secured Loan
Definition
A loan backed by collateral, something valuable such as property. (If the borrower fails to pay the loan, the lender may take possession of the collateral) ex: automobile loan
Term
Unsecured Loan
Definition
A loan that doesn't require any collateral ( Given to usually highly regarded customers, long standing businesses or those considered financially stable. )
Term
Process of Pledging
Definition
Accounts receivable are company assets often used as collateral for a loan. ( process of pledging )
Term
How does Pledging work?
Definition
A percentage of the value of a firm's accounts receivable pledged ( usually about 75 percent ) is advanced to the borrowing firm. A customer pays off their accounts, the funds received are forwarded to the leader in repayment of the funds that were advanced.
Term
Line of Credit
Definition
A given amount of unsecured short-term funds bank will lend to a business, provided the funds are readily available. Given to a business with a strong relationship with the bank. Line of Credit is NOT guaranteed.
Term
Revolving Credit Agreement
Definition
A line of credit that's guaranteed but usually comes with a fee
Term
Commercial Finance Companies
Definition
Organizations that make short-term loans to borrowers who offer tangible assets as collateral. ( Property, Planet, Equipment )Loan given to businesses that cannot get short-term funds elsewhere. Higher interest rates because of higher risk.
Term
What is one of the world's largest commercial financial companies?
Definition
General Electric Capital, $584 billion in assets and operations in over 50 countries around the world.
Term
Factoring
Definition
the process of selling accounts receivable for cash
Term
Commercial Paper
Definition
Unsecured promissory notes of $100,000 and up that mature ( come due) in 270 days or less. States a fixed amount of money the business agrees to repay to the lender (investor) on a specific date at a specified rate of interest.
Term
When does a corporation use "Commercial Paper"?
Definition
When a corporation needs funds for just a few months and prefers not to have to negotiate with a commercial bank, larger firms will sell commercial paper as a strategy for funds.
Term
According to the National Small Business Association (NSBA) nearly one third of all small firms use what to finance their businesses?
Definition
Credit Cards
Term
In setting long-term financing objectives, financial managers generally ask what three questions?
Definition
1. What are our organizations long term goals/objectives?
2. What funds do we need to achieve the firm's long-term goals and objectives?
3. What sources of long-term funding (capital) are available, and which will best fit our needs?
Term
What two major sources does long-term funding come from?
Definition
1. Debt Financing
2. Equity Financing
Term
Term-Loan Agreement
Definition
A promissory note that requires the borrower to repay the loan in with interest in specified monthly or annual installments. Loan interest is tax-deductible.
Term
Debt Financing
Definition
borrowing money the company has a legal obligation to repay. Firms can borrow by either getting a loan from a lending institution or issuing bonds.
Term
When are long-term loans usually due?
Definition
3 to 7 years, but may extend to 15 to 20 years
Term
What may lenders that offer long-term loans to businesses require due to the repayment period being quite long?
Definition
Collateral such as real estate, machinery, equipment, company stock, or other items of value. May also require certain restrictions to force the firm to act responsibly.
Term
risk/return trade-off
Definition
The principle that the greater the risk a lender takes in making a loan, the higher the interest rate required.
Term
Indenture Terms
Definition
The terms of agreement in a bond issue
Term
In an organization is unable to obtain it's long-term financing needs by getting a loan from a lending institution such as a bank, it may try to issue what?
Definition
Bonds
Term
How do Bonds work?
Definition
A bond is like an IOU with a promise to repay the amount borrowed, with interest, on a certain date.
Term
What types of organizations can issue bonds?
Definition
-Federal
-State
-Local Government
-Federal Government agencies
-Foreign governments
-Corporations
Term
Secured bond
Definition
A bond issues with some form of collateral such a real estate, equipment, or other pledged assets
Term
Unsecured bond
Definition
A bond backed only by the reputation of the issuer; also called a debenture bond.
Term
If a firm cannot obtain a long-term loan from a lending institution or is unable to sell bonds to investors, it may seek what?
Definition
Equity Financing
Term
Equity Financing
Definition
fund available when the owners of the firm sell shares of ownership to outside investors in the form of stock, when they reinvest company earnings in the business, or when they obtain funds from venture capitalists.
Term
Initial Public Offering (IPO)
Definition
The first time a company offers to sell it's stock to the general public
Term
Retained Earnings
Definition
profits the company keeps and reinvests in the firm
Term
A company that uses retained earnings often saves what? ( money wise)
Definition
- interest payments
- dividends (payments for investing in stock)
- any possible underwriting fees for issuing bonds or stock
Term
Venture Capital
Definition
Money that is invested in new or emerging companies that are perceived as having great profit potential
Term
What companies were helped by venture capital?
Definition
Intel, Apple, Cisco Systems. (Started)
Facebook, Google ( helped expand and grow )
Term
Leverage
Definition
Raising needed funds through borrowing to increase a firm's rate of return
Term
Cost of Capital
Definition
The rate of return a company must earn in order to meet the demands of its leaders and expectations of its equity holders
Term
Securities markets are divided into what 2 markets?
Definition
Primary. and Secondary
Term
Securities markets, financial marketplaces for stock, bonds, and other investments, serve what 2 major functions?
Definition
1. Assist businesses in finding long-term funding to finance capital needs such ad expanding operations, developing new products, or buying buying major goods and services

2. Provide private investors a place to buy and sell securities (investments) such as stocks and bonds, that can help them build their financial future.
Term
What does the Primary Market, and Secondary Market handle?
Definition
Primary handles the sale of new securities

Secondary handles the trading of these securities between investors with the proceeds of the sale going to the investor selling the stock, not to the corporation whose stick is sold.
Term
Corporations make money on the sale of their securities (stock) only once - when they sell it on the ___ market?
Definition
Primary
Term
How much did Facebooks IPO (initial public offering) raise in 2012?
Definition
16 billion dollars
Term
What company had the highest IPO (Initial public offering) in the past 25 years ?
Definition
Visa, raising 18 billion from it's IPO in 2008
Term
Investment Bankers
Definition
Specialists who assist in the issue and sale of new securities
Term
Explain what a investment banker does.
Definition
They can prepare extensive financial analyses necessary to gain SEC approval for bond or stock issues. Can also underwrite new issues of stock or bonds.
Term
Institutional investors
Definition
Large Organizations - such as pension funds, mutual funds, and insurance companies - that invest their own funds or the funds of others. Because of their vast buying power, institutional investors are a powerful force in securities markets.
Term
Bond
Definition
A corporate certificate indicating that a person has lent money to a firm ( or a government )
Term
Maturity Date
Definition
the exact date the issuer of a bond must pay the principal to the bondholder
Term
Interest
Definition
the payments the issuer of the bond makes to the bondholder for the use of the borrowed money
Term
What are some firms that have a 100 year maturity dates?
Definition
Disney, IBM, Coca-Cola
Term
What is the "coupon rate"?
Definition
Another word for bond interest, a term that dates back to when bonds were issued as bearer bonds.
Term
what are 6 types of government securities that compete with corporate bonds?
Definition
- U.S government bond
- Treasury bill ( T-bill)
- Treasury Note
-Treasury Bond
-Municipal Bond
-Yankee Bond
Term
What are the two different classes of corporate bonds?
Definition
- unsecured bonds
- secured bonds
Term
debenture bonds
Definition
bonds that are unsecured, and are not backed by any specific collateral ( such as land or equipment )
Term
secured bonds
Definition
sometimes called mortgage bonds, are backed by collateral such as land or buildings that pledged to bondholders if interest or principal isn't paid when promised.
Term
3 main ideas of a bond..
Definition
- issued with an interest rate
- are unsecured or secured by some type of collateral
- must be repaid at maturity date
Term
sinking fund
Definition
A reserve account in which the issuer of a bond periodically retires some part of the bond principal prior to maturity so that enough capital will be accumulated by the maturity date to pay off the bond.
Term
What 3 things do a sinking fund do?
Definition
- provide for an orderly retirement (repayment) of a bond issue
- they reduce the risk the bond will not be repaid
- they support the market price of the bond because they reduce the risk the bond will not be repaid.
Term
What does a callable bond do?
Definition
permits the bond issuer to pay off the bond's principal before its maturity date.
Term
Stock investors are often called 2 things..
Definition
Bulls- believe that stock prices are going to rise; they buy stock in anticipation of the increase.
Bears- expect stock prices to decline and sell their stocks in anticipation of falling prices When stock prices are declining, the market is called a bear market.
Term
Capital Gains
Definition
The positive difference between purchase price of a stock and it's sale price.
Term
Blue chip stock
Definition
a term derived from poker where the highest value chip was a blue chip. These stocks generally pay regular dividends and experience consistent price appreciation. ( Johnson and Johnson, Coca-Cola, IBM)
Term
Growth Stocks
Definition
Stocks of corporations in emerging fields such as technology, biotechnology, or Internet related firms , whose earning are expected to grow as a faster rate than other stocks. While riskier, growth stocks may offer the potential for higher return
Term
Income Stocks
Definition
Stocks of public utilities, usually offer investors a high divided yield that generally keeps pace with inflation
Term
Penny Stocks
Definition
Stocks that sell for less than $2 and are considered risky investments
Term
Market Order
Definition
tells a broker to buy or sell a stock immediately at the best price available.
Term
Limit Order
Definition
tells the broker to buy or sell a stock at a specific price if that prices becomes available.
Term
What are round lots, and odd lots?
Definition
Round lots, buying in shares of 100 at a time
Odd lots, buying fewer than 100 shares at a time.
Term
Stock Splits
Definition
An action by a company that gives stockholders two or more shares of stock for each one they own
Term
Buying stock on margin
Definition
Purchasing stocks by borrowing some of the purchase cost from the brokerage firm
Term
What financial websites carry up-to-the-minute information about companies stock and investment information?
Definition
MSN Money, Yahoo, Finance and CNBC
Term
Which newspapers carry enormous wealth of information on investment information?
Definition
The Wall Street Journal, Barron's, Investors Business Daily
Term
Dow Jones Industrial Average ( the Dow)
Definition
The average cost of 30 selected industrial stocks, used to give an indication of the direction ( up or down) of the stock market over time
Term
Who Began the practice of measuring stock averages in 1882, using prices of 12 key stocks?
Definition
Charles Dow
Term
When did the Dow broaden to include 30 stocks?
Definition
1982
Term
In 1999, Dow added what 5 companies?
Definition
- Home Depot
- SBC Communications
- NASDAQ
- Intel
- Microsoft
Term
When did Visa, Goldman Sachs, and Nike replace Alcoa, Bank of America and Hewlett-Packard on the Dow?
Definition
2013
Term
What are the 12 original Dow companies?
Definition
-American Cotton Oil
-American Sugar Refining Co.
-American Tabacco
-Chicago Gas
-Distilling & Cattle Feeding Co.
-General Electric Co.
-Laclede Gas Light Co.
-National Lead
-North American Co.
-Tenessee Coal
-US Leather
-US Rubber Co
Term
When was the first major market crash, and what percentage of it's value was lost in a single day?
Definition
October 29th, 1929. Lost 13%
Term
On what day was the largest drop in the market, and how what percentage was the drop?
Definition
October 19th 1987, with a 22% drop
Term
How much did investors lose in the market value from years 2000-2002 due to the burst in tech stock?
Definition
$7 trillion
Term
Program trading
Definition
Giving instructions to computer to automatically sell if the price of a stock dips to a certain point to avoid potential losses. ( Believed to be the cause of the market crashes)
Term
What mechanisms did the US exchange create to restrict program trading whenever the market moves up or down by a large number of points in a trading day?
Definition
- curbs
- circuit breakers
Term
What time period did prices of existing homes rise 50%?
Definition
200-2006
Term
When did housing value price fall 6.3 trillion?
Definition
2006-2011
Term
Money
Definition
Anything that people generally accept as payment for goods and services
Term
What were items used as currencies before money?
Definition
salt, feathers, fur pelts, stones, rare shells, tea, horses
Term
Barter
Definition
The direct trading of goods or services for other goods or services
Term
How does a barter exchange work?
Definition
You put goods or services into system and get trade credits for other goods and services that you need.
Term
What are the 5 standards for a useful form of money?
Definition
- Portability
- Divisibility
- Stability
- Durability
- Uniqueness
Term
What is the newest forms of money?
Definition
Electronic Money (e-money)
Term
How much does it cost to make a penny or nickel?
Definition
1.8 cents to make a penny, 9.4 cents to make a nickel.
Term
Who is the Fed chairperson in control of the US Money supply?
Definition
Janet Yellen
Term
money supply
Definition
the amount of money the Federal Reserve Bank makes available for people to buy goods and services.
Term
M-1
Definition
Money that can be accessed quickly and easily (coins and paper money, checks, travelers checks, etc.)
Term
M-2
Definition
Money Included in M-1 plus money that may be taken a little more time to obtain (savings accounts, money market accounts, mutual funds, certificates of deposit, etc.)
Term
M-3
Definition
M-2 plus big deposits like institutional money market funds
Term
Inflation
Definition
rise in price
Term
Deflation
Definition
decline in price
Term
What does the size of the money supply affect?
Definition
employment and economic growth or decline
Term
Falling Dollar value
Definition
the amount of goods and services you can buy with a dollar decrease
Term
rising dollar value
Definition
the amount of goods and services you can buy with a dollar goes up
Term
What 5 major parts does the federal reserve consist of?
Definition
1. the board of governors
2. The federal Open Market Committee (FOMC)
3. 12 Federal Reserve Banks
4. three advisory councils
5. the member banks of the system
Term
Is the Federal Reserve apart of the Us Government?
Definition
No. it's a private firm
Term
What are the 12 Federal Reserve District Banks?
Definition
1. Boston
2. New York
3. Philadelphia
4. Cleveland
5. Richmond
6. Atlanta
7. Chicago
8. St. Louis
9. Minneapolis
10. Kansas City
11. Dallas
12. San Francisco
Term
What are the 3 basic tools the Feds use to manage the money supply?
Definition
- reserve requirement
- open-market operations
- discount rate
Term
Reserve Requirement
Definition
A percentage of commercial banks' checking and savings accounts that must be physically kept in the bank
Term
Open-market Operations
Definition
The buying and selling of U.S government bonds by the Fed with the goal of regulating the money supply
Term
discount rate
Definition
the interest rate that the Fed charges for loans to member banks
Term
What are the two interest rates the Feds can control?
Definition
discount rate
federal funds rate
Term
What did the Community Reinvestment Act do?
Definition
encouraged loans to families with questionable ability to repay
Term
What was the Troubled Asset Relief Program?
Definition
a 700 dollar billion bailout packagee the treasury department proposed towards the end of George bush presidency
Term
What 3 major organizations protect. your money during an economic turn down?
Definition
- The Federal Deposit Insurance Corporation ( FDIC)
- The savings Association Insurance Fund (SAIF)
- the National Credit Union Administration ( NCUA)
Term
Federal Deposit Insurance Corporation ( FDIC )
Definition
An independent agency of the U.S government that insurance bank deposits. ( up to 250k per account )
Term
Savings Association Insurance Fund ( SAIF )
Definition
the part of the FDIC that insures holders of accounts in savings and loan associations
Term
National Credit Union Administration
Definition
provides up to 250k coverage per individual depositer per institution, coverages include all accounts- checking accounts, savings accounts, money market accounts, and certificates of deposit.
Term
Judiciary
Definition
The branch of government chosen to oversee the legal system through a system of courts
Term
Business Law
Definition
The rules, statutes, codes, and regulations that provide a legal framework for the conduct of business and that are enforceable by court action.
Term
What laws must a business person be familiar with?
Definition
product liability, sales contracts, fair competition, consumer protection, taxes, and bankruptcy
Term
what two major fields of laws important to businesspeople?
Definition
statutory law and common law
Term
Statutory Law
Definition
State and Federal constitutions, legislative enactments, treaties of the cereal government, and ordinances- in short, written law
Term
Common Law
Definition
The body of law that comes from decisions handed down by courts; also referred to as unwritten law.
Term
precedent
Definition
Decisions judges have made in earlier cases guide the handling of new cases
Term
Administrative agencies
Definition
Federal or state institutions and other government organizations created by Congress or state legislatures with delegated power to create rules and regulations within their mandated area of authority
Term
Uniform Commercial Code (UCC)
Definition
A comprehensive commercial law adopted by every state in the US that covers sales laws and other commercial laws
Term
How many Articles does the UCC have?
Definition
11
Term
What are the major 2 articles of the UCC?
Definition
Article 2 which regulates warranties, and Article 3 which covers negotiable instruments
Term
Warranty
Definition
guarantees that the product sold will be acceptable for the purpose for which the buyer intends to use it
Term
Where are the two types of warranties?
Definition
Express warranties
Implied warranties
Term
Express Warranties
Definition
specific representations by sellers that buyers rely on regarding the goods they purchase ( i.e the warranty you receive in the box with an iPad or toaster )
Term
Implied Warranties
Definition
guarantees concerning products legally imposed on the seller
Term
Full warranty
Definition
requires seller to replace or repair a product at no charge if the product is not functioning or defective
Term
Limited warranty
Definition
limits the defects or mechanical problems the seller covers
Term
Negotiable Instruments
Definition
Forms of commercial paper ( such as checks) that are transferable among businesses and individuals and represent a promise to pay a specified amount
Term
Article 3 of the UCC requires negotiable instruments to follow what 4 conditions?
Definition
1. be written and signed by the marker or drawer
2. be made payable on demand or at a certain time
3. be made payable to the bearer ( the person holding the instrument)
4. contain an unconditional promise to pay a specified amount of money
Term
Endorsement
Definition
payee's signature
Term
What are 3 things a cash flow statement has?
Definition
- cash from from operating activities
- cash from from investing activities
- cash from financing activities
Term
What are the 3 special features bonds?
Definition
- callable bond
- sinking bond
- convertible bond
Term
What are the 5 key financial statements?
Definition
- balance sheet
- income statement
-statement of cash flow
-statement of changes in equity
- note of financial statement
Term
Accounting does what 4 major things?
Definition
- recording
- classifying
-summarizing
-interpreting
Term
The FR ( Federal Reserve ) control the money supply with 4 important methods, what are they?
Definition
-Reserve requirement
-open-market operations
-discount rate
-FR checking-clearing role
Term
How do investors buy securities? ( 4 ways )
Definition
-stockbroker
-online broker
-strategy
-diversification
Term
Relating to trade credit what does "2/10, net 30" mean
Definition
When a customer gets their bill the 2/10 means a 2% discount if paid within 10 days, if not it's due in 30 days and you won't receive the 2% discount
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