Term
| An entity is ________ and ________ from its owners. |
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Definition
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Term
Entites classified by purpose are:
1.
2. |
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Definition
1. non-for-profit
2. for profit
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Term
Entities classified by ownership are:
1.
2. |
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Definition
1. publicly held
2. privately held |
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Term
What are the advantages of a corporation?
(there are 6) |
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Definition
- seperate legal existance
- limited liability of stockholders
- transferable ownership rights
- ability to acquire capital
- continuous life
- corporate mangement
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Term
The disadvantages of corporation
(there are 3) |
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Definition
- corporate management
- government regulations
- additional taxes
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Term
| What makes the Corporate balance sheet different than the balance sheet of other types of companies? |
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Definition
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Term
| Other than regulatory cost what is another reason why companies don't want to go public? |
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Definition
| Because there would be too many owners |
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Term
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Definition
| permission from the state to be an incorporated business and issue shares |
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Term
What are the inital steps to forming a corporation?
(there are 3) |
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Definition
- file application with the secretary of state
- the state grants a charter
- the corporation develops by-laws
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Term
| Capital and equity represent what? |
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Definition
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Term
| Two primary sources of capital and equity |
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Definition
- owner's investment
- net income
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Term
What are the two ways a corporation can issue common stock?
(two ways) |
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Definition
- directly to investors
- indirectly through an investment banking firm
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Term
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Definition
| minimum of shares that should be set aside for liabilites |
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Term
| what is one thing common stockholders get to do that preferred stockholders dont? |
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Definition
they get to vote
one vote per share |
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Term
| when would a company stop issuing divideneds? |
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Definition
| when there is negative retained earnigns |
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Term
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Definition
| to issue an incentive to get stockholders |
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Term
Paid in capital is the _______ by _______.
And it constists of what 3 things? |
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Definition
1. investment
2. owners
- common stock
- preferred stock
- additional paid in capital
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Term
| What are the two primary sources of equity? |
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Definition
- paid in capital
- retained earnings
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Term
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Definition
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Term
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Definition
| people have already purchased it |
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Term
| When do companies make the journal entries for the stock? |
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Definition
| the day that it became public...they dont change the numbers from what the IPO says |
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Term
| Is retained earnings affected by the prior stock transaction? |
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Definition
| no it deals with the incomes or loss |
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Term
What are features often associated with preferred stock?
(there are 3) |
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Definition
- preferences to dividends
- preference as to assets in liquidation
- non-voting
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Term
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Definition
| net income that a company retains for the use in the business |
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Term
| net income _______ retained earnings and a net loss _____ retained earnings |
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Definition
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Term
| an increase in retained earnings is a ____ and a decrease in retained earnings is a _____. |
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Definition
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Term
| A debit balance in retained earnings is identified as a ________. |
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Definition
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Term
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Definition
| a distribution of cash or stock to stockholders on a pro rata basis |
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Term
how are dividends expresssed?
(2 ways) |
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Definition
- as a percentage of the par or stated value
- as a dollar amont per share
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Term
| In order for a corporation to pay a cash dividend what are the 3 things it must have? |
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Definition
- retained earnings
- adaquate cash
- a declaration of dividends
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Term
| what are the 3 dates for a dividend? |
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Definition
- declaration date
- record date
- payment date
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Term
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Definition
| it becomes a legal liability of the company; journal entry |
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Term
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Definition
no accounting entries
the "cut off" date to get a dividend
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Term
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Definition
| the check is in the mail directly from the company |
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Term
| SEC stands for? and it can do what? |
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Definition
Securities exchange commission
can make companies go public |
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Term
| the statement of financial position can also be called? |
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Definition
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Term
| what is the financial performance determined by? |
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Definition
| the revenue minus the expenses= net income |
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Term
| the profit or loss statement that is equal to the income statement is what? |
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Definition
| the revenues minus expenses = net income/loss |
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Term
Assets = what we ___
Liabilities = what we ___
Equity= _______ |
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Definition
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Term
statement of financial analysis:
(three things) |
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Definition
- horizontal
- vertical
- ratio
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Term
| two uses of different accounting methods |
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Definition
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Term
| the annual report notes what? |
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Definition
| whether LIFO or FIFO was used |
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Term
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Definition
| owns more than one company |
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Term
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Definition
shows year to year comparison (increase or decrease)
shows trends, constant rises and falls
most of info from balance sheet |
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Term
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Definition
way to compare to other companies/ourselves
all items expressed as a % of single, base item
most info comes from income statement
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Term
ratio analysis
profit margin ratio |
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Definition
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Term
5 uses of financial statement analysis
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Definition
- individual investment and/or loan decision
- creditors/investors
- judge past performance
- analyze current position
- anticipate future potential and/or risk
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Term
A comparison of financial statement items for a single company over a given period of time is called:
- horizontal analysis
- vertical analysis
- operational analysis
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Definition
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Term
Assume you were concerned whether selling and administrative expenses were reasonable this year and given the level of sales. Which type of analysis would you perform to help address your concern?
- horizontal analysis
- vertical analysis
- industry comparisons
- trend analysis
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Definition
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Term
| what does paid in capital mean? |
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Definition
| the dollar amounts that came from owner investment |
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Term
| what does retained earnings mean? |
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Definition
| the income/loss of business operations |
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Term
| when dividends are issued how many times a year are they usually offered? |
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Definition
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Term
| What two things decrease from issuing dividends? |
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Definition
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Term
| what does the horizontal analysis show? |
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Definition
| the study of % changes from year to year |
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Term
| what does a vertical analysis show? |
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Definition
| the relationship of a financial statement item to its base |
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Term
| what is recievable turnover? |
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Definition
| # of times that A/R is collected throughout the year which indicates the efficency to turn A/R into cash |
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Term
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Definition
| total liabilities/ total assets |
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Term
| What is the fundamental goal of a business? |
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Definition
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Term
| What does gross profit margin mean? |
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Definition
| For every dollar of sales revenue we generate so much (specific number) goes to profit, and the rest goes to COGS |
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Term
| Equation for gross profit margin or gross margin |
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Definition
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Term
True or false
Dividends become a liablity of the corporation on the payment date |
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Definition
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Term
True or false
When a corporation sells par value stock at an amount greater then par value, the additional income is reported on the income statement. |
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Definition
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Term
True or false
A corporation pays federal and state taxes |
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Definition
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