Term
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Definition
Business Owned By One Person
Pros: simple to set up/gives you control over the business
Cons: Liabilities |
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Term
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Definition
Business owned by two or more persons associated as partners, usually to pool together skills and resources
Pros: Tax Breaks, Skills
Cons: Dual Liability |
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Definition
Business formed as a seperate legal entity owned by stockholders
Pros: transfer of ownership, no liability, easier to raise funds
Cons: Taxes higher |
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Term
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Definition
| "Limited Liability Corp"; has the best of both worlds: tax advantages and limited liability |
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Term
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Definition
| is the information system that identifies, records, and communicates the economic events of an organization to interested users |
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Term
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Definition
are managers who plan, organize, and run the business
ex: marketing managers, production supervisors, finance directors, company officers |
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Term
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Definition
| ex. "Investors" to decide what to do with stock/"Creditors"such as suppliers and bankers to decide if they should sell or lend $$$ |
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Term
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Definition
IRS
Customers
Labor Unions
Regulatory Agencies |
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Term
| How does accouting affect our economy? |
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Definition
| When accounting is dependable more investors will invest in companies, supporting the NYSE |
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Term
| Define Sarbanes-Oxley Act (SOA)? |
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Definition
This was put in place to reduce unethical corp behavior and decrease liklihood of scandals
1. top management certifies accuracy
2. Stronger penalties
3. Outside Auditors
4. Increased oversight from BO Directors |
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Term
| What are the 3 main business activities? |
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Definition
1. Financing
2. Investing
3. Operating |
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Term
| What are the two primary sources of outside funds for businesses? |
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Definition
1."debt financing"(borrowing money)
2. "issuing shares"/"equite financing" (selling stock) in exchange for cash |
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Term
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Definition
| People or entities a business owes money to |
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Term
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Definition
| $$ Amounts + other obligations owed to creditors |
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Term
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Definition
| Debt to a bank or other lendors |
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Term
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Definition
| debt securities owed to investors at some date in the future |
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Term
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Definition
| is the term used to describe the cash exchanged for shares purchased by stockholders |
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Term
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Definition
| Creditor claims have priority over stockholder claims |
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Term
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Definition
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Term
| What are "investing activities"? |
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Definition
involve the purchase of the resources a company needs in order to operate
*investments are also considered here when business has excess cash |
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Term
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Definition
Resources owned by a company in order to operate "property, plant, and equipment"
*Cash is most important asset |
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Term
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Definition
is the increase in assets or decrease in liabilities resulting from the sale of goods or service within normal course of business
1. sales revenue
2. service revenue
3. interest revenue |
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Term
| What are some assets with shorter lives? |
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Definition
| "Supplies", fall under operating activity; used in day to day operations/ "inventory" |
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Term
| define "account receivable"? |
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Definition
| right to recieve money from customer in the future |
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Term
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Definition
Costs necessary to produce product and generate revenue
ex 1. cost of goods sold (ingredients)
2. selling expenses
3. marketing expenses
4. admin expenses
5. interest expense
6. income tax |
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Term
| Define "accounts payable"? |
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Definition
| libailities arising from expenses; this is the obligation to pay for these goods |
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Term
| Define "interest payable"? |
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Definition
outstanding amounts owed to bank, etc
also: wages payable
income taxes payable
sales taxes payable
property taxes payable |
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Term
| Define "income statement"? |
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Definition
how you report revenues and expenses for a period of time
note: amts paid in dividends are not expenses/ amts received from issuing stock are not revenues |
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Term
| define "retained earnings statement"? |
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Definition
| How much of the net income was distributed to dividends and how much altogether is left for future growth |
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Term
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Definition
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Term
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Definition
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Term
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Definition
| a set point in time of what your business owns (assets) and what it owes (liabilities) |
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Term
| define "statement of cash flows" |
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Definition
| where your business obtained cash in a period of time, how it was used |
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Term
| define "stockholders equity" |
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Definition
| owners claims to their assets |
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Term
| what is the "basic accouting equation" |
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Definition
| assets = liabilities + stockholders equities |
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Term
| what 3 categories are found in a statement of cash flows? |
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Definition
1. operating
2. investing
3. financing
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Term
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Definition
| 4 financial statements + MD&A, Notes, and Auditor's Report |
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Term
| Define "Management dicussion & analysis" (MD&A)? |
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Definition
| views on the company's ability to pay near term obligations, fund operations and expansion, results of operations/ favorable vs unfavorable/uncertainties |
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Term
| Define "Notes to Financial Statements"? |
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Definition
calrify +detail
accounting policies
explanations of uncertainties and contigencies
stats |
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Term
| what is an "auditors report"? |
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Definition
independent outside auditor who states the fairness of financial information
CPAs can perform these and give their okay which is called "unqualified opinion" |
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