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Exam 3 Flashcards
Finance and Accounting
77
Management
Undergraduate 1
11/07/2010

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Term
accounting
Definition
a comprehensive system for collecting, analyzing, and communicating financial information to a firm's owners and employees, to the public, and to various regulatory agencies
Term
bookkeeping
Definition
recording of accounting transactions
Term
accounting information system (AIS)
Definition
organized procedure for identifying, measuring, recording, and retraining financial information so that it can be used in accounting statements and management reports
Term
controller
Definition
chief accounting officer; manages all of the firm's accounting activities
Term
financial accounting
Definition
field of accounting concerned with the external users (consumer groups, unions, stockholders, suppliers, creditors and government agencies) of a company's financial information
Term
managerial accounting
Definition
field of accounting that serves the internal users of a company's financial information
Term
certified public accountants (CPA)
Definition
accountant licensed by the state and offering services to the public
Term
audit
Definition
systematic examination of a company's accounting system to determine whether its financial reports reliably represent its operations
Term
tax services
Definition
assistance provided by CPAs for tax preparation and tax planning
Term
core competencies for accounting
Definition
combination of skills, technology, and knowledge that will be necessary for the future CPA
Term
private accountant
Definition
salaried accountant hired by a business to carry out its day to day financial activities
Term
certified management accountant (CMA)
Definition
professional designation awarded by the Institute of Management Accountants in recognition of management accounting qualifications
Term
Sarbanes-Oxley Act of 2002
Definition
enactment of federal regulations to restore public trust in accounting practices by imposing new requirements on financial activities in publicly traded corporations
Term
Accounting Equation Assets
Definition
= Liabilities + Owners' Equity; used by accountants to balance data for firm's financial transactions at various points in the year
Term
asset
Definition
any economic resource expected to benefit a firm or an individual who owns it
Term
liability
Definition
debt owed by a firm to an outside organization or individual
Term
owners' equity
Definition
amount of money that owners would receive if they sold all of a firm's assets and paid all of its liabilities
Term
financial statement
Definition
any of several types of reports summarizing a company's financial status to stakeholders and to aid in managerial decision making
Term
balance sheet
Definition
financial statement that supplies detailed information about a firm's assets, liabilities, and owner's equity
Term
current asset
Definition
asset that can be converted into cash within a year
Term
liquidity
Definition
ease with which an asset can be converted into cash
Term
fixed asset
Definition
asset with long-term use or value, such as land, buildings, and equipment
Term
intangible asset
Definition
nonphysical asset, such as a patent or trademark, that has economic value in the form of expected benefit.
Term
current liability
Definition
debt that must be paid within one year
Term
long-term liability
Definition
debt that is not due for at least one year
Term
paid-capital
Definition
money that is invested in a company by its owners
Term
retained earnings
Definition
earnings retained by a firm for its use rather than paid out as dividends
Term
income statement (profit-and-loss statement)
Definition
financial statement listing a firm's annual revenues and expenses so that a bottom line shows annual profit or loss
Term
revenues
Definition
funds that flow into a business from the sale of goods or services
Term
operating expenses
Definition
costs, other than the cost of revenues, incurred in producing a good or service
Term
operating income
Definition
profit-operating expenses
Term
net income
Definition
gross profit-operatng expenses and income taxes
Term
budget
Definition
detailed statement of estimated receipts and expenditures for a future period of time
Term
revenue recognition
Definition
formal recording and reporting of revenues at the appropriate time
Term
full disclosure
Definition
guideline that the financial statements should not include just numbers but should also furnish management's interpretations and explanations of those numbers
Term
solvency ratio
Definition
financial ratio, either short or long-term for estimating the borrower's ability to repay debt
Term
profitability ratio
Definition
financial ratio for measuring a firm's potential earnings
Term
activity ratio
Definition
financial ratio for evaluating management's efficiency in using a firm's assets
Term
short-term solvency ratio
Definition
financial ratio for measuring a company's ability to pay immediate debts
Term
current ratio
Definition
financial ratio for measuring a company's ability to pay current debts out of current assets
Term
debt
Definition
a company's total liabilities
Term
time value of money
Definition
principle that invested money grows, over time, by earning interest or some other form of return
Term
compound growth
Definition
the compounding of interest over time
Term
stock
Definition
a portion of ownership of a corporation
Term
common stock
Definition
the most basic form of ownership, including voting rights on major issues, in a company
Term
market value
Definition
current price of a share of stock in the market
Term
book value
Definition
value of a common stock expressed as the firm's owners' equity divided by the number of common shares
Term
dividend
Definition
payment to shareholders, on a pershare basis, out of the company's earnings
Term
mutual fund
Definition
company that pools cash investments from individuals and organizations to purchase a portfolio of stocks, bonds, and other securities
Term
blue-chip stock
Definition
well-established company with a sound financial history and a stable pattern of dividend payouts
ex. McDonalds
Term
exchange-traded fund
Definition
a bundle of stocks or bonds that are in an index that tracks the overall movement of a market but unlike a mutual fund, can be traded like a stock
Term
securities
Definition
stocks, bonds, and mutual funds representing secured, or asset-based claims by investors against issuers
Term
securities markets
Definition
markets in which stocks and bonds are sold
Term
primary securities market
Definition
market in which new stocks and bonds are brought and sold by firms and governments
Term
Security and exchange commission
Definition
government agency that regulates U.S securities markets
Term
investment bank
Definition
financial institution that specializes in issuing and reselling new securities
Term
corporate bond
Definition
a formal pledge obligating the issuer (the company) to pay interest periodically and repay the principal at maturity
Term
bankruptcy
Definition
court-granted permission for a company to not pay some or all debts
Term
market value
Definition
current price of share in the stock market
Term
book value
Definition
value of a common stock expressed as total shareholder's equity divided by the number of shares of stock
Term
municipal bond
Definition
issued by a state or local government
Term
government bond
Definition
bond issued by the federal government
Term
finance
Definition
planning, obtaining, and managing the company's funds in order to accomplish its objectives
Term
par value
Definition
face value of a share of stock at the time it is originally issued (how much buyers are willing to pay for stocks book value
Term
bond
Definition
security through which an issuer promises to pay the buyer a certain amount of money by a specified future date
Term
portfolio
Definition
combined holdings of all the financial assets of any company or individual
Term
liability
Definition
a debt owned by a firm to an outside organization or individual
Term
financial statements
Definition
reports summarizing a company's financial status to stakeholder's and to aid in managerial decision making
Term
balance sheets
Definition
sheets that supply detailed information about accounting factors such as current assets, fixed assets, and intangible assets
Term
current assets
Definition
cash
Term
fixed assets
Definition
land, building, and equipment
Term
intangible
Definition
patent or trademark
Term
current liabilities
Definition
debts that must be paid in one year
Term
long-term liabilities
Definition
debt must be paid in a year or more
Term
paid-in capital
Definition
money invested by owners; type of owner's equity
Term
retained earnings
Definition
net profits kept by a firm
Term
operating expenses
Definition
cost to produce a good/service
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