Term
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Definition
| an evolving report that describes a company's goals and its current plans for achieving those goals |
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1. a description of the company
2. a marketing plan
3. a description of the operations of the company
4. a financial plan
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| how much uncertainty exists about the future operations of the company |
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| borrowed money that will be repaid within a year or less |
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| allows a company to borrow money "as needed" with a pre-arranged agreed upon interest rate and a specific payback schedule |
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| money borrowed that will be repaid to creditors or returned after more than a year |
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| Cost-Volume-Profit analysis |
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Definition
| shows how profit will be affected by alternative sales volumes, selling prices of products, and various costs of the company |
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| the activity level; how many are sold |
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| constant in total for a specific period of time; not affected by differences in volume during that same time period |
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| constant per unit of volume, and changes in total in a time period in direct proportion to the changes in volume |
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| Total Variable Cost Formula |
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| the sum of fixed costs and the variable costs at that volume |
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Definition
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| Net Income (Profit)=Revenues-Expenses |
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| unit sales volume at which a company earns zero profit |
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| total contribution margin |
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| at a given sales volume, is the difference between the estimated total sales revenue and the estimated total variable costs |
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| contribution margin per unit |
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| the difference between the estimated sales revenue per unit and the estimated variable costs per unit |
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Profit=[(selling price per unit)(unit sales volume)]-[(variable cost per unit)(unit sales volume)]-(total fixed costs)
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unit sales volume= total fixed costs/contribution margin per unit
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Unit Sales Volume=(Total Fixed costs + Desired Profit)/Contribution margin per unit
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| Unit Sales Volume to achieve a profit |
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| performs services or activities that benefit individuals or business customers |
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| purchase goods for resale to their customers |
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| make their products and then sell these products to their customers |
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| a report that gives a financial description of one part of a company's planned activities for the budget period |
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Definition
| the entrepreneur focuses on improving the activities that show significant differences between budgeted and actual results |
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| service company's operating cycle |
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Definition
| average time it takes the company to use cash to acquire supplies and services, to sell the services to customer, and to collect cash from its customers |
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| retail company's operating cycle |
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Definition
| average time it takes the company to use cash to buy goods for sale, to sell goods to customers, and to collect cash from its customers |
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Definition
| set of interrelated reports showing the relationships among a company's 1) goals to be met, 2) activities to be performed, 3) resources to be used, 4) and expected financial results |
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1. Sales Budget
2. Purchases Budget
3. Selling expenses budget
4. General and administrative expenses budget
5. Cash budget
6. Projected income statement
7. Projected Balance sheet
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Term
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Definition
| shows the number of units of inventory that the company expects to sell each month, the related monthly sales revenue, and in which months the company expects to collect cash from these sales |
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Definition
| shows the purchases (in units) required in each month to make the expected sales (from the sales budget) in that month and to keep inventory at desired levels |
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Definition
| shows the expenses and related cash payments associated with planned selling activities |
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| general and administrative expenses budget |
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Definition
| shows the expenses and related cash payments associated with expected activities other than selling |
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Definition
| shows the company's expected cash receipts and payments, and how they affect the company's cash balance |
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| operating activities section |
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Definition
| summarizes the cash receipts and payments the company expects as a result of its planned operations |
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| investing activities section |
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Definition
| shows the cash payments and receipts the company expects from planned investing activities |
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| financing activities section |
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Definition
| shows the cash receipts and payments the company expects from planned financing activities |
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| process of quantifying manager's plans and showing the impact of these plans on a company's operating activities |
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| report showing a comparison between a company's budgeted and actual expenses for an accounting period |
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| statement summarizing a company's expected financial position (assets, liabilities, and owner's equity) at the end of the budget period |
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Definition
| perform services or activities that benefit individuals or business customers |
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| purchase goods for resale to their customers |
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| make their products and then sell products to customers |
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| an individual who is willing to risk uncertainty in exchange for the reward of earning a profit |
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| company that can pay off its debt |
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| a company owned by one individual who is the sole investor of capital into the company |
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| a company owned by two or more individuals who each invest capital, time, and/or talent into the company and share in the profits and losses of the company |
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| contract that explains the responsibilities, obligations, and benefits of a partnership |
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| a company organized as a separate legal entity, or body, according to the laws of a particular state; owned by stockholders/shareholders |
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| integrated accounting system |
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Definition
| means by which accounting information about a company's activities is identified, measured, recorded, and summarized so that it can be communicated in an accounting report |
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Definition
| people outside the company |
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| managers and employees within the company |
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| establishes the company's goals and the means of achieving these goals |
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| identifying, measuring, recording, summarizing, and then communicating economic information about a company to internal users for management decision-making |
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| Cost analysis/ Cos Accounting |
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| the process of determining and evaluating the costs of specific products or activities within a company |
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Definition
| identifying, measuring, recording, summarizing, and then communicating information about a company to external users for the use of their various decisions |
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Generally accepted accounting principles
GAAP |
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Definition
| currently accepted principles, procedures, and practices that companies use for financial accounting and reporting in the United States |
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Definition
| accounting reports used to summarize and communicate financial information about a company |
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Definition
| summarizes the results of its operating activities for a specific period of time and shows the company's profit for that period |
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Definition
| the prices charged to a company's customers for the goods or services the company provided to them |
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Definition
| the costs of providing the goods or services |
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Definition
| the excess revenues over expenses (company's profit) |
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Definition
| expenses are greater than revenues |
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Term
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Definition
summarizes its financial position on a given date (usually the last day of the time period covered by an income statement)
statement of financial position |
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Definition
| economic resources that a company owns and that it expects will provide future benefits to the company |
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Definition
| the company's economic obligations (debts) to its creditors |
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| the owner's current investment in the assets of the company |
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| corporation's owners' equity |
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| statement of changes in owner's equity |
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| supporting financial statement that explains the amount shown in the owner's equity section of the company's balance sheet |
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| summarizes its cash receipts, cash payments, and net change in cash for a specific period of time |
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Definition
| document that includes a company's income statement, balance sheet, and cash flow statement, along with other related financial accounting information |
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Definition
| owners of a sole proprietorship or partnership assume all responsibility for the debts incurred by the company |
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Definition
| person who has the authority of act for another |
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Definition
| corporation is taxed and then the dividends that are passed down to shareholders are taxed as personal income |
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Definition
| the process of filing the required documents and obtaining permission from a state to operate as a corporation |
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| articles of incorporation |
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Definition
| state-approved documents for becoming a corporation |
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Definition
| corporation owned by a small number of investors |
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| publicly held corporation |
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Definition
| sell stock to the general public and generally there are no restrictions on the selling of stock by current stockholders |
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| initial public offering (IPO) |
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Definition
| corporations first sale of stock to the public |
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Term
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Definition
| where investors buy the stock of corporations from other investors rather than from the corporations |
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| enterprise resource planning systems |
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Definition
| information system involving computer software that records and stores many different types of data in a data warehouse |
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| companies that use internet to conduct transactions electronically |
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| set of concepts that provides a logical structure for financial accounting and reporting |
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Definition
| information that has the capacity to influence a user's decision |
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Definition
| information that is capable of being verified |
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| when the monetary amount is large enough to make a difference in a user's decision |
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Definition
| information that shows a realistic picture of what it is meant to represent |
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Definition
| total investments made by stockholders in the corporation |
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Definition
| the ownership units in the corporation |
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Definition
| ownership unit of a corporation |
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Definition
| type of capital stock issued for which stockholders receive certain additional rights in exchange for giving up some of the usual stockholder's rights |
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Definition
| monetary amount per share of a common stock (par value) |
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Definition
| total dollar amount the corporation receives from selling its stock |
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| additional paid-in-capital |
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Definition
| the difference between the selling price and the par value in each stock transaction |
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Definition
| the amount of its lifetime net income that has been reinvested in the corporation to date |
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| income from continuing operations |
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Definition
| reports a corporation's revenues and expenses that resulted from its ongoing operations |
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Definition
| found by subtracting cost of goods sold from net sales to obtain gross profit and then by deducting the selling expenses and the general and administrative expenses |
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Definition
| increases in a corporation's income that result from transactions unrelated to providing goods and services |
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| decreases in a corporation's income that result from transactions unrelated to providing goods and services |
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Definition
| the amount of net income earned for each share of common stock |
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| Earnings per share= net income/ average number of common shares |
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Definition
| earnings per share equation |
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| publicly available information |
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Definition
| any information released to the public |
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| notes to the financial statements |
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Definition
| informs external users of the company's accounting policies and of important financial information that is not reported in the financial statements |
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Definition
| the examination of a company's accounting records and financial statements by an independent certified public accountant (CPA) |
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Definition
| includes the corporation's annual report and other information such as officer's names, salaries, and stock ownership |
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| interim financial statements |
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Definition
| financial statements prepared for a period of less than one year |
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Definition
| when a company compares the corporation's current operating results and financial position with its past performance or with its expected performance |
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Definition
| involves comparing a company's operating results and financial position with that of competing companies, industry averages, or averages in related industries |
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Definition
| shows the changes in a company's operating results over time in percentages as well as dollar amounts |
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Definition
| shows each item in a given financial statement of a give period or date as a percentage of another item on that statement |
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1. Income Statement
2. Balance Sheet
3. Statement of Retained Earnings
4. Cash Flow Statement |
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Definition
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Sales Revenues
-Cost of goods sold
=Gross Profit
-Operating Expenses
=Net Income |
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Definition
| Normal Income Statement components |
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| Assets= Liabilities+ Owner's Equity |
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Definition
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| Selling Price (in units)- Variable Cost (in units) |
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Definition
| Contribution Margin Equation |
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Sales Revenue
-Variable Cost
=Contribution Margin
-Fixed Cost
=Net Income |
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Definition
| Income Statement with Contribution Margin |
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Sales Revenue
-Expenses
=Net Income |
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Definition
| Income Statement for Services |
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