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Comm 1800
Test 2 Vocab
152
Business
Undergraduate 1
03/23/2011

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Term
accounting
Definition
recording, classifying, summarizing, and interpreting of financial events and transactions to provide information
Term
managerial accounting
Definition
accounting used to provide information and analyses to managers inside the organization to assist them in decision making
Term
accounting system
Definition
method used to record and summarize accounting data into reports
Term
certified management accountant (CMA)
Definition
professional accountant certified by the Institue of Certified Management Accountants
Term
financial accounting
Definition
accounting information and analyses prepared for people outside the organization
Term
annual report
Definition
a yearly statement of the financial condition, progress, and expectations of an organization
Term
private accountant
Definition
an accountant who works for a single firm. government agency, or nonprofit organization
Term
public accountant
Definition
an accountant who provides accounting servies to individuals or businesses on a fee basis
Term
certified public accountant
Definition
an accountant who passes a series of examinations established by the American Institue of Certified Public Accountants
Term
auditing
Definition
the job of reviewing and evaluating the information used to prepare a company's financial statements
Term
independent audit
Definition
an evaluation and unbiased opinion about the accuracy of a company's financial statements
Term
certified internal auditor
Definition
an accountant who has a bachelor's degree and two years of experience in internal auditing
Term
tax accountant
Definition
an accountant trained in tax law and responsible for preparing tax returns or developing tax strategies
Term
accounting cycle
Definition
six-step procedure that results in the preparation and analysis of the major financial statements
Term
bookkeeping
Definition
the recording of business transactions
Term
journal
Definition
record book or computer program where accounting data are first entered
Term
double-entry bookkeeping
Definition
practice of writing every business transaction in two places
Term
ledger
Definition
specialized accounting book or computer program in which inforamtion from accounting journals is accumulated into specific categories
Term
trial balance
Definition
summary of all the financial data in the account ledgers that ensures the figures are correct and balanced
Term
financial statement
Definition
a summary of all the transactions that have occurred over a particular period
Term
fundamental accounting equation
Definition
assets = liabilities + owner's equity
Term
balance sheet
Definition
financial statement that reports a firm's financial conditions at a specific time and is composed of three major ccounts: assets, liabilities, and owners' equity,
Term
assets
Definition
economic resources owned by a firm
Term
liquidity
Definition
the ease with which an asset can be converted into cash
Term
current assets
Definition
items that can or will be converted into cash within one year
Term
fixed assets
Definition
assets that are relatively permanent, such as land
Term
intangible assets
Definition
long-term assets that have no real physical form but have value
Term
liabilities
Definition
what the business owes to others
Term
accounts payable
Definition
current liabilities are bills the company owes to others for merchandise or services purchased on credit, but not yet payed for
Term
notes payable
Definition
short-term or long-term liabilites that a business promises to repay by a certain date
Term
bonds payable
Definition
long-term liabilities that represent money lent to the firm that must be paid back
Term
owners' equity
Definition
amount of the business that belongs to the owners minus any liabilities owed by the business
Term
retained earnings
Definition
accumulated earnings from a firm's profitable operations that were reinvested in the business and not paid out to stock holders in dividends
Term
income statement
Definition
financial statement that shows a firm's profit after costs, expenses, and taxes
Term
net income or net loss
Definition
revenue left over after all costs and expenses, including taxes, are paid.
Term
cost of goods sold
Definition
a measure of the cost of merchandise sold or cost of raw materials and supplies used for producing items for resale
Term
gross profit
Definition
how much a firm earned by buying and selling merchandise
Term
operating expenses
Definition
costs involved in operating a business, such as rent, utilities, and salaries
Term
depreciation
Definition
systematic write-off of the cost of a tangible asset over its estimated useful life
Term
statement of cash flows
Definition
financial statement that reports cash receipts and disbursements related to a firms three major activities: operations, investments, and financing
Term
cash flow
Definition
difference between cash coming in and cash going out of a business
Term
ration analysis
Definition
assessment of a firm's financial condition using calculations and interpretations of financial rations developed from the firm's financial statements
Term
finance
Definition
function in a business that acquires funds for the firm and manages those funds within the firm
Term
financial management
Definition
job of managing a firm's resources so it can meet its goals and objectives
Term
financial managers
Definition
managers who examine financial data prepared by accountants and recommend strategies for improving the financial performance of the firm
Term
short-term forecast
Definition
forecast that predicts revenues, costs, and expenses for a period of one year or less
Term
cash flow forecast
Definition
forecast that predicts the cash inflows and outflows in future periods, usually months or quarters
Term
long-term forecast
Definition
forecast that predicts revenues, costs, and expenses for a period longer than 1 year, sometimes as far as 5 or 10 years in the future
Term
budget
Definition
financial plan that sets forth management's expectations, and, on the basis of those expectations, allocates the use of specific resources throughout the firm
Term
capital budget
Definition
a budget that highlights a firm's spending plans for major asset purchases that often require large sums of money
Term
cash budget
Definition
a budget that estimates cash inflows and outflows during a particular period like a month or a quarter
Term
operating (or master) budget
Definition
budget that ties together the firm's other budget and summarizes its proposed financial activities
Term
financial control
Definition
a process in which a firm periodically compares its actual revenues, costs, and expenses with its budget
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
debt financing
Definition
funds raised though 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
Term
short-term financing
Definition
funds needed for a year or less
Term
long-term financing
Definition
funds needed for more than a year
Term
trade credit
Definition
practice of buying goods and services now and paying for them later
Term
promissory note
Definition
a written contract with a promise to pay for a supplier a specific sum of money at a definite time
Term
secured loan
Definition
a loan backed by collateral, something valuable such as property
Term
unsecured loan
Definition
a loan that doesn't require any collateral
Term
line of credit
Definition
a given amount of unsecured short-term funds a bank will lend to a business, provided the funds are readily available
Term
revolving credit agreement
Definition
a line of credit that's guaranteed but usually comes witha fee
Term
commercial finance companies
Definition
organization that make short-term loans to borrowers who offer tangible assets as collateral
Term
commercial finance companies
Definition
organization that make short-term loans to borrowers who offer tangible assets as collateral
Term
factoring
Definition
process of selling accounts receivable for cash
Term
commercial paper
Definition
unsecured promissory notes of $100,000 and up that mature in 270 days or less
Term
term-loan agreement
Definition
a promissory note that requires the borrower to repay the loan in specified installments
Term
risk/return trade-off
Definition
the principle that the greater the risk a lender takes, the higher the interest rate
Term
indenture terms
Definition
terms of agreement in a bond issue
Term
secured bond
Definition
bond issued with some form of collateral
Term
unsecured bond
Definition
a bond backed by only by the reputation of the issuer; also called a debenture bond
Term
venture capital
Definition
money that is invested in new or emerging companies
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 lenders
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 lenders and expectations of its equity holders
Term
initial public offering (IPO)
Definition
first public offering of a corporation's stock
Term
investment bankers
Definition
specialists who assist in the issue and sale of new securities
Term
institutional investors
Definition
large organizations that invest their own funds or the funds of others
Term
stock exchange
Definition
an organization whose members can buy and sell securities
Term
over-the-counter (OTC) market
Definition
exchange that provides a means to trade stocks not listed on the national exchanges
Term
NASDAQ
Definition
a nationwide electronic system that links dealers across the nation so that they can buy and sell securities electronically
Term
Securities and Exchange Commission (SEC)
Definition
federal agency responsible for regulating the various stock exchanges
Term
prospectus
Definition
condensed version of economic and financial information that a company must file with the SEC before issuing stock
Term
stocks
Definition
shares of ownership in a company
Term
stock certificate
Definition
evidence of stock ownership
Term
dividends
Definition
part of a firm's profits that the firm may distribute to stockholders as either cash payments or additional shares of stock
Term
common stock
Definition
most basic form of ownership in a firm, it confers voting rights and the right to share in profit through dividends
Term
preferred stock
Definition
stock that gives its owners preference in the payment of dividends and an earlier claim on assets than common stockholders if the company is forced out of business and its assets sold
Term
bond
Definition
corporate certificate indicating that a person has lent money to a firm
Term
maturity date
Definition
exact date the issuer of a bond must pay the principal to the bondholder
Term
interest
Definition
payment the issuer of the bond makes to the bondholders for use of the borrowed money
Term
debenture bonds
Definition
bonds that are unsecured
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
stockbroker
Definition
a registered representative who works as a market intermediary to buy and sell securities for clients
Term
diversification
Definition
buying several different investment alternatives to spread the risk of investing
Term
capital gains
Definition
positive difference between the purchase price of a stock and its sale price
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
junk bonds
Definition
high-risk, high-interest bonds
Term
mutual fund
Definition
an organization that buys stocks and bonds and then sells shares in those securities to the public
Term
exchange-traded funds (ETFs)
Definition
collections of stocks and bonds that are traded on exchanges but are traded more like individual stocks than like mutual funds
Term
Dow Jones Industrial Average
Definition
average cost of 30 selected industrial stocks, used to give an indication of the direction of the stock market
Term
program trading
Definition
giving instructions to computers to automatically sell if the price of a stock dips to a certain point to avoid losses
Term
money
Definition
anything that people generally accept as payment for goods and services
Term
barter
Definition
direct trading of goods or services for other goods or services
Term
money supply
Definition
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
Term
M-2
Definition
Money included in M-1 plus money that may take a little more time to obtain
Term
M-3
Definition
M-2 plus big deposits like institutional money market funds
Term
reserve requirement
Definition
a percentage of commercial banks' checking and savings accounts that must be physically kept in the bank
Term
credit risk
Definition
investor's risk of loss arising from a borrower who does not make payments as promised
Term
market risk
Definition
the risk that the value of a portfolio, either an investment portfolio or a trading portfolio, will decrease
Term
operational risk
Definition
risk arising from execution of a company's business functions
Term
open-market operations
Definition
buying and selling of US government bonds by the Fd 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
commercial bank
Definition
a profit-seeking organization that receives deposits from individuals and corporations in the form of checking and savings accounts and then uses some of these funds to make loans
Term
demand deposit
Definition
technical name for a checking account
Term
time deposit
Definition
technical name for a savings account, the bank can require prior notice before withdrawals can be made
Term
certificate of deposit (CD)
Definition
a time-deposit account that earns interest to be delivered at the end of the certificate's maturity date
Term
savings and loan association
Definition
financial institution that accepts both savings and checking deposits and provides home mortgage loans
Term
credit unions
Definition
nonprofit, member-owned financial cooperatives that offer the full variety of banking services to their members
Term
nonbanks
Definition
financial organization that accept no deposits but offer ,any of the servies provided by regular banks (pension funds, insurance companies, commercial finance companies, consumer finance companies, and brokerage houses
Term
pension funds
Definition
amounts of money put aside by corporations, non profit organizations, or unions to cover part of the financial needs of members when they retire
Term
Federal Deposit Insurance Corporation (FDIC)
Definition
an independent agency of the US government that insures bank deposits
Term
Saving Association Insurance Fund (SAIF)
Definition
part of the FDIC that insures holders of accounts in savings and loan associations
Term
electronic funds transfer (EFT) system
Definition
computerized system that electronically performs financial transaction such as making purchases, paying bills, and receiving paychecks
Term
debit card
Definition
an electronic funds transfer tool that serves the same function as checks
Term
smart card
Definition
an electronic funds transfer tool that is a combination credit card, debit card, phone card, driver's license card, and more
Term
letter of credit
Definition
promise by the bank to pay the seller a given amount if certain conditions are met
Term
banker's acceptance
Definition
a promise that the bank will pay some specified amount at a particular time
Term
World Bank
Definition
bank primarily responsible for financing economic development; also known as the International Bank for Reconstruction and Development
Term
International Monetary Fund (IMF)
Definition
organization that assists the smooth flow of money among nations
Term
risk
Definition
chance of loss, the degree of probability of loss, and the amount of possible loss
Term
speculative risk
Definition
a chance of either profit or loss
Term
pure risk
Definition
threat of loss with no chance for profit
Term
self-insurance
Definition
practice of setting aside money to cover routine claims and buying only "catastrophe" policies to cover big losses
Term
uninsurable risk
Definition
a risk that no company will cover
Term
insurable risk
Definition
a risk that the typical company will cover
Term
insurable interest
Definition
possibility of the policyholder to suffer a loss
Term
insurance policy
Definition
written contract between the insured and an insurance company that promises to pay for all or part of a loss
Term
premium
Definition
fee charged by an insurance company for an insurance policy
Term
claim
Definition
statement of loss that the insured sends to the insurance company
Term
law of large numbers
Definition
principle that if a large number of people are exposed to the same risk, a predictable number of losses will occur during a given period of time
Term
rule of indemnity
Definition
rule saying that an insured person or organisation cannot collect more than the actual loss from an insurable risk
Term
stock insurance company
Definition
type of insurance company owned by stockholders
Term
mutual insurance company
Definition
type of insurance company owned by its policy holders
Term
health maintenance organizations (HMOs)
Definition
health care organizations that require members to choose from a restricted list of doctors
Term
preferred provider organizations (PPOs)
Definition
health care organizations similar to HMOs except that they allow members to choose their own physicians (for a fee)
Term
health savings accounts (HSAs)
Definition
tax-deferred savings accounts linked to low-cost, high-deductible health insurance policies
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