Term
| Working capital cycle aka cash flow |
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Definition
| The time between the payments of what a business owes (payables) and the collection of what a business is owed (receivables). |
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Term
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Definition
| Includes all the activity between the first cash spent producing a product to receiving a cash payment for its sale |
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Term
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Definition
| Refers to the length of time between the purchase of raw materials, production of the goods or service, and the sale of the finished product |
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Term
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Definition
| The time between the purchase of raw materials on credit and the cash payments made for the resulting accounts payable |
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Term
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Definition
| The time between the sale of the final product on credit and cash receipts for the accounts receivable |
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Term
| Speculative cash balances |
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Definition
| Extra cash on hand to take advantage of special bargains, discounts, etc |
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Term
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Definition
| Short-term loans to the US gov't with a smallest denomination of $10,000 and that mature in less than one year. r. Sold at a discount, the buyer pays an amount less than the face value of the T-Bill, but still receives the full amount when the bill matures. |
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Term
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Definition
| an unsecured loan to a large corporation with good and well established credit ratings. These loans usually mature between 15 and 45 days (but it can be anywhere from 1 to 270 days). |
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Term
| Certificates of Deposit (CD's) |
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Definition
short-term instruments issued by commercial
banks. CDs are issued in denominations up to $100,000 and may be traded in the
secondary market. They are insured by the Federal Deposit Insurance Corporation(FDIC) |
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Term
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Definition
| Credit sales per day x Length of collection period |
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Term
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Definition
| Cost of goods sold / Inventory |
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Term
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Definition
| Number of days in a period / Inventory turnover rate |
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Term
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Definition
| Cost of goods sold / Industry average turnover rate |
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Term
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Definition
| Any liability with an original payment period of less than one year |
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Term
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Definition
| An informal understanding between a bank and a borrower that a specific amount of funds is available for future financing purposes |
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Term
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Definition
| a formal line of credit offered to larger businesses in exchange for up-front fees and standard interest payments |
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Term
| The common rule regarding risk and return is... |
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Definition
| The higher the risk, the greater the expected return |
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Term
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Definition
| A form of long-term financing |
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Term
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Definition
| Represents a simple share of ownership and each common stock share has one vote to cast when electing the corporation's board of directors |
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Term
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Definition
| A form of stock that is traded at a far lower volume than common stock and has specific privileges |
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Term
| Return on Sales: ROS = Net Income / Sales |
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Definition
| Return on Sales is a measure of how much profit was created for every dollar of sales. |
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Term
| Asset Turnover: Turnover = Sales / Total Assets |
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Definition
The total sales generated in a particular year divided by the value of total assets for the same
period is referred to as asset turnover, or in some cases, just as turnover . Asset turnover
measures the amount of “activity” taking place in a business, or how active the assets are in
regard to generating sales . The higher the use of these assets, such as the plant and equipment,
the higher the level of this activity reflected in the asset turnover ratio . |
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Term
| Return on Assets: ROA = Net Income / Total Assets |
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Definition
| Return on Assets is a measure of how much profit was created for the assets gathered. |
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Term
| Return on Equity: ROE = Net Income / Owners' Equity |
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Definition
| Return on Equity is a measure of how much profit was created with owners’ investments. |
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Term
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Definition
Current Assets/Current Liabilities
A company’s ability to meet
short‐term debt obligations |
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Term
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Definition
(Current Assets-Inventory)/Current Liabilities
A company’s ability to meet
short‐term debt obligations
without including inventory. |
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Term
| Debt-to-Total Assets Ratio |
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Definition
Total Debt/Total Assets
The percentage of funds that
represent debt provided by
creditors. |
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Term
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Definition
Total Debt/Tangible Net Worth
What the business “owes”
compared to what it is worth. |
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Term
| Times Interest Earned Ratio |
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Definition
EBIT/Total Interest Expense
The extent to which earnings
can decline before the
company is unable to meet its
annual interest costs |
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Term
| Average Inventory Turnover Ratio |
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Definition
Cost of Goods Sold/Average Inventory
The number of times average
inventory is sold out, or
turned over, during the
accounting period. |
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Term
| Average Collection Period Ratio |
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Definition
Credit Sales/Accounts Receivable
The average number of days it
takes to collect accounts
receivables. |
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Term
| Average Payable Period Ratio |
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Definition
Purchases/Accounts Payable
The average number of days it
takes to pay its accounts
receivable. |
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Term
| Net Sales to Total Assets |
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Definition
Net Sales/Total Assets
A company's ability to generate sales in relation to assets |
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Term
| Return on Sales Ratio (ROS) |
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Definition
Net Income/Total Sales
A company's profit for each dollar of sales it makes |
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Term
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Definition
Net Income/Total Assets
A company's profit for each dollar of assets it owns |
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Term
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Definition
Net Income/Owners' Equity
A company's profit for each dollar of stockholder's investment in the firm |
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Term
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Definition
| A concept that measures how "big" of a company the managers have created using the owners' investments. |
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Term
| Leverage ratio according to Foundation |
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Definition
| Leverage = Total Assets/Total Owners' Equity |
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Term
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Definition
| EPS = Net Income/Number of Shares |
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Term
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Definition
Current Assets/Current Liabilities
Measures liquidity and reveals whether the firm can meet its debts for the coming year |
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Term
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Definition
Quick/Acid Ratio = (Current Assets - Inventory)/Current Liabilites
Also measures liquidity and reveal whether the firm can meet its debts for the coming year |
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Term
| Total Debt-to-Total Assets Ratio |
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Definition
D-to-A Ratio = Total Debt/Total Assets
Shows the degree of financial leverage |
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Term
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Definition
| Defined as total owner's equity divided by the number of shares outstanding. Owner's equity is the value of the owner's claim against the company's assets |
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Term
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Definition
| Establishes the rights of a person to own, use, transfer, and captures the economic value of different kinds of property. The right to private property and the right to keep profits are defined in a body of property law |
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Term
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Definition
| Real estate and everything attached to it |
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Term
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Definition
| Property other than real property |
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Term
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Definition
| Property generated by a person's creative activities |
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Term
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Definition
Established in a wide variety of law and regulation; in general, fair competition is broadly established in laws that prevent business from:
restraining trade and monopolizing markets (Sherman Antitrust Act)
Price discrimination, tying, and exclusive agreements that substantially lessen competition (Clayton Act) |
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Term
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Definition
| A mutual agreement between two or more parties whose terms are enforceable in court; does not have to be written |
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Term
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Definition
| Voluntary agreement; Consideration; Contractual Capacity |
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Term
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Definition
| The offer and acceptance have to be freely and knowingly made; it is not a contract if any party uses fraud or force to come to agreement |
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Term
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Definition
| To be a contract, the agreement to exchange must involve something of economic value (money, goods, or services). Therefore, the word consideration is another term for money |
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Term
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Definition
| To be a contract, both parties must have a legal ability to enter into the contract. Individuals who are minors, mentally unstable, mentally incapable, insane, or intoxicated lack the capacity to enter into a legal contract |
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Term
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Definition
| The failure to live up to the terms agreed upon in a contract; unless mutually agreed to by all parties, a court can order the terms of the contract to be met and damages to be paid if the breach resulted in monetary damages |
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Term
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Definition
| Statutory Law; Common Law; Administrative Law |
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Term
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Definition
| Written laws established by federal, state, county, or city governments |
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Term
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Definition
| Unwritten laws that are established by judicial decisions such law in the US was inherited from English law |
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Term
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Definition
| Regulations established by administrative agencies |
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Term
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Definition
| Dispute between the gov't and an individual over whether behavior meets the set standards; violation of criminal law is a crime and may be punished by fines &/or imprisonment; are resolved through the court system (trial courts & appellate court) |
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Term
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Definition
| A dispute between two individuals; violations of civil law may result in fines but no imprisonment; civil disputes are initiated and resolved through lawsuits |
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Term
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Definition
Determine the facts of a case, the laws that pertain, and apply the law to resolve the dispute. If either party feels the law was misinterpreted or misapplied, they can appeal the decision to an Appellate Court.
Court judgments are binding and enforced through the power of gov't |
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Term
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Definition
| A form of dispute resolution where the parties submit their case to a neutral third party; arbitrator decides how the dispute will be resolved and acts like a judge in the process; can be binding or non-binding; |
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Term
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Definition
| A form of negotiated resolution using a third party mediator to help reach an agreement; non-binding; mediator acts like a counselor |
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Term
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Definition
| Allows an individual to assign another person the power to act and to enter into agreements; the two parties (principal and agent) enter into an Agency Agreement |
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Term
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Definition
| The person who wished to have a specific task accomplished |
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Term
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Definition
| The person who acts on the principal's behalf |
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Term
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Definition
| Establishes a business partnership (form of organization) and creates mutual agency for the partners on behalf of the company |
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Term
| Uniform Commercial Code (UCC) |
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Definition
| Consistent set of statutory laws; addresses the rights of buyers and sellers, transfers of ownership, the legal assumption of risk, and warranties. |
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Term
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Definition
| Defines the terms that the seller will honor |
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Term
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Definition
Allows the buyer to assume that:
The seller has clear title to the product;
The product will perform the function for which it was produced and sold;
It will perform as advertised |
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Term
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Definition
| Covers any additional terms the seller will honor |
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Term
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Definition
| A civil wrong and includes all "wrongs" (other than breach of contract) in which one party through action or inaction causes harm to another |
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Term
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Definition
| A form of tort and specifically describes a criminal act in which one party in a transaction hurts another by purposefully deceiving or manipulating them. |
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Term
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Definition
| An important part of tort law which establishes a business' legal responsibility to be diligent (not negligent) in the design, production, sale, and consumption of products. |
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Term
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Definition
| The application of ethical behavior in a business context |
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Term
| Code of Conduct Violation |
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Definition
| Acting in a way that is inconsistent with the organization's ethical standards |
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Term
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Definition
| Choosing actions that promote your personal interest at the cost of others |
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Term
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Definition
| Altering records to present inaccurate information to managers, owners and/or potential investors |
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Term
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Definition
| Informing superiors or authorities of illegal or unethical organizational behavior |
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Term
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Definition
| Philosopher that suggested that the principal role of business is to maximize returns to its owners. |
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Term
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Definition
| The people who have an interest in the conduct of the business including employees, customers, vendors, the local community, or even society as a whole |
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Term
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Definition
| Companies become quasi-democratic associations, and employees and other stakeholders are given voice over a company's operations |
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Term
| Sarbanes-Oxley Act of 2002 |
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Definition
Signed into US law on July 30, 2002 in response to a number of major corporate and accounting scandals; establishes new or enhanced standards for all US public company boards, management, and public accounting firms.
Aka the Public Company Accounting Reform and Investor Protection Act of 2002 and is commonly called SOX or Sarbox |
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Term
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Definition
| Person who raises a concern about wrongdoing taking place in an organization and, in most cases, this person is from that organization. |
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Term
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Definition
Simplest and most common form of business organization; reps +70% of US businesses;
Primary Advantages:
Ease of formation,
Least costly form of ownership to begin,
Total decision-making authority and control,
Minimal legal restrictions,
Ease of discontinuing.
Disadvantages:
Single owner status,
Unlimited liability,
Owner is responsible for all losses,
Limited skills &capabilites,
Limited access to capital,
Challenges in transitioning the biz |
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Term
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Definition
Created when two or more individuals agree to create a business & jointly own the assets, be responsible for the liabilities, & to share both the profits/losses.
Advantages:
Acquisition of complementary skills &talents,
Flexibility of division of profits,
Larger pool of capital w/the ability to attract more partners,
Minimal gov't regulation
Disadvantages:
Unlimited liability of one partner,
Challenges in accumulating additional capital,
Difficulty in changing partners,
Potential lack of continuity,
Potential for personality &authority conflicts,
Bound by law of agency |
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Term
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Definition
| Partnership is held responsible for the decisions and behavior of each partner |
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Term
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Definition
| Most complex business entity; separate legal entity that exists independently of its owners, referred to as stockholders, and may engage in business, make contracts, sue and be sued, own property, and pay taxes. |
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Term
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Definition
| Operates in the state in which it was incorporated |
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Term
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Definition
| Incorporated in one state but has operations in another, and therefore the other state considers it a foreign corporation |
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Term
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Definition
| Operates in a country in which it was not incorporated and so is considered an alien corporation in that country. |
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Term
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Definition
| Conveys special ownership rights; have first claim on profits; no say in how company is run and no voting rights |
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Term
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Definition
| Conveys no special privileges with respect to the profits of the company but does convey voting rights in the corporation |
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Term
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Definition
"Sub-chapter Corporation", s means small; is only distinct for federal income tax purposes.
Advantages:
Limited liability of owners,
Avoids double taxation,
Continue in perpetuity,
Easy owner transfership.
Disadvantages:
100 shareholder limit,
Some legal & regulatory requirements,
Individual shareholders,
Control of organization can be lost to larger shareholders |
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Term
| Limited Liability Company (LLC) |
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Definition
Offers the simplicity of a partnership with the legal protection of a corporation; owners referred to as members.
Advantages:
Limited Personal Liability,
No strict gov't reporting,
Avoids double taxation.
Disadvantages:
Cannot sell w/o consent of partners,
Control of organization can be lost to larger shareholders,
Limited life & dissolves at death of partner |
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