Shared Flashcard Set

Details

Basic Finance Vocabulary 1
Vocabulary terms from chapter one and two of Foundations of Financial Management (11e) by Block & Hirt.
28
Business
Undergraduate 3
07/12/2007

Additional Business Flashcards

 


 

Cards

Term
INFLATION
Definition
The phenomenon of prices increasing with the passage of time.
Term
DISINFLATION
Definition
A leveling off or slowdown of price increases.
Term
SOLE PROPRIETORSHIP
Definition
A form of organization that represents single-person ownership and offers the advantages of simplicity of decision making and low organizational and operating costs.
Term
PARTNERSHIP
Definition
A form of ownership in which two or more partners are involved. Like the sole proprietorship, [this] arrangement carries unlimited liability for the owners. However, there is only single taxation for the partners, an advantage over the corporate form of ownership.
Term
CORPORATION
Definition
A form of ownership in which a separate legal entity is created. [It] may sue or be sued, engage in contracts, and acquire property. It has a continual life and is not dependent on any one stockholder for maintaining its legal existence. [It] is owned by stockholders who enjoy the privilege of limited liability. There is, however, the potential for double taxation in the corporate level in the form of profits, and again at the stockholder level in the form of dividends.
Term
ARTICLES OF INCORPORATION
Definition
A document that establishes a corporation and specifies the rights and limitations of the business entity.
Term
INSTITUTIONAL INVESTORS
Definition
Large investors such as pension funds or mutual funds.
Term
INSIDER TRADING
Definition
This occurs when someone has information that is not available to the public and then uses this information to profit from trading in a company's common stock.
Term
LIMITED PARTNERSHIP
Definition
A special form of partnership to limit liability for most of the partners. Under this arrangement, one or more partners are designated as general partners and have unlimited liability for the debts of the firm, while the other partners are designated as limited partners and are only liable for their initial contribution.
Term
PUBLIC FINANCIAL MARKETS
Definition
Markets in which national, state, and local governments raise money for highways, education, welfare, and other public activities.
Term
CORPORATE FINANCIAL MARKETS
Definition
Markets in which corporations, in contrast to governmental units, raise funds.
Term
MONEY MARKETS
Definition
Competitive markets for securities with maturities of one year or less. The best examples of [these] market instruments would be Treasury bills, commercial paper, and negotiable certificates of deposit.
Term
CAPITAL MARKETS
Definition
Competitive markets for equity securities or debt securities with maturities of more than one year. The best examples of [these] market securities are common stock, bonds, and preferred stock.
Term
PRIMARY MARKETS
Definition
The market for the raising of new funds as opposed to the trading of securities already in existence.
Term
SECONDARY MARKETS
Definition
The market for securities that have already been issued. It is a market in which investors trade back and forth with each other.
Term
RESTRUCTURING
Definition
Process that can take many forms in a corporation, such as changes in the capital structure (liability and equity on the balance sheet). It can also result in the selling of low-profit-margin divisions with proceeds reinvested in better investement opportunities. Sometimes [it] results in the removal of the current management team or large reductions in the workforce. [It] has also included mergers and acquisitions.
Term
INCOME STATEMENT
Definition
A financial statement that measures the profitability of the firm over a time period. All expenses are subtracted from sales to arrive at net income.
Term
EARNINGS PER SHARE
Definition
The earnings available to common stockholders divided by the number of common stock shares oustanding.
Term
PRICE-EARNINGS RATIO
Definition
The multiplier applied to earnings per share to determine current value. [This] ratio is influenced by the earnings and sales growth of the firm, the risk or volatility of its performance, the debt-equity structure, and other factors.
Term
BALANCE SHEET
Definition
A financial statement that indicates what assets the firm owns and how those assets are financed in the form of liabilities or ownership interest.
Term
NET WORTH OR BOOK VALUE
Definition
Stockholders' equity minus preferred stock ownership. Basically, [this] is the common stockholders' interest as represented by common stock par value, capital pain in excess of par, and retained earnings. If you take all the assets of the firm and subtract its liabilities and preferred stock, you arrive at [this].
Term
STATEMENT OF CASH FLOWS
Definition
Formally established by the Financial Accounting Standards Board in 1987, the purpose of [this] is to emphasize the critical nature of cash flow to the operations of the firm. The statement translates accrual-based net income into actual cash dollars.
Term
CASH FLOWS FROM OPERATING ACTIVITIES
Definition
Cash flow information that is determined by adjusting net income for such items as depreciation expense, changes in current assets and liabilities, and other items. It is the first section presented in the statement of cash flows.
Term
CASH FLOWS FROM INVESTING ACTIVITIES
Definition
Cash flow that is generated (or reduced) from the sale or purchase of long-term securities or plant and equipment. It is the second section presented in the statement of cash flows.
Term
CASH FLOWS FROM FINANCING ACTIVITIES
Definition
Cash flow that is generated (or reduced) from the sale or repurchase of securities or the payment of cash dividends. It is the third section presented in the statement of cash flows.
Term
DEPRECIATION
Definition
The allocation of the initial cost of an asset over its useful life. The annual expense of plant and equipment is matched against the revenues that are being produced.
Term
FREE CASH FLOW
Definition
Cash flow from operating activities, minus expenditures required to maintain the productive capacity of the firm, minus dividend payouts.
Term
LIQUIDITY
Definition
The relative convertability of short-term assets to cash. Thus, marketable securities are highly liquid assets, while inventory may not be.
Supporting users have an ad free experience!