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Comm 1800 > Accounting/Finance > Flashcards

Accounting/Finance Flashcards

1
Q

Areas of Finance

A

Corporate Finance 

Investments 

Financial Markets and Institutions

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2
Q

How does money flow into and out of a firm?

A

Sales of products or services

Investment returns

Financing

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3
Q

Key activities of finance

A

planning, investment, financing

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4
Q

Planning

A

A key activity of finance

Preparing financial plans, which project revenues, expenditures, and financing needs over a given period

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5
Q

Investment (spending money)

A

A key activity of finance

Investing the firm’s funds in projects and securities that provide high returns in relation to their risks. 

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6
Q

Financing (raising money)

A

A key activity of finance

Obtaining funding for the firm’s operations and investments and seeking the best balance between debt and equity

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7
Q

Risk-return tradeoff

A

The higher the risk, the greater the return that is required

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8
Q

Liquidity and managing cash flows

A

More Liquid = better b/c easier to turn into cash for instant use

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9
Q

Short-term expenses

A

Outlays used to support current production and selling activities

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10
Q

Long-Term Expenses/Capital Expenditures

A

Major expenditure that requires a large up-front investment and is expected to generate substantial cash inflow in return

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11
Q

Capital budgeting

A

Determining which long-term or fixed assets to acquire in an effort to maximize shareholder value 

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12
Q

Accounts receivable

A

Amounts owed to the firm by customers that paid w/ credit

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13
Q

Accounts Payable

A

Amounts the firm owes for credit purchases due within a year

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14
Q

Managing inventory

A

(Stock of goods being held for production or for sale to customers)

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15
Q

Production managers wants

A

lots of raw materials on hand to avoid production delays

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16
Q

Marketing managers wants

A

finished goods on hand so customer orders can be filled

17
Q

Financial managers wants

A

work w/ production & marketing to balance conflicting goals

18
Q

Debt Financing

A

Inability to influence management unless the borrower defaults

Payment of interest and principal is needed and are contractually obligated

Stated maturity and requires repayment of principal by a specified date

Interest is a tax deductible expense

19
Q

Equity Financing

A

Common stockholders have voting rights

Equity owners have residual claim on income with no obligation to pay dividends

The company is not required to repay equity, which has no maturity date

Dividends are not tax deductible and are paid from after-tax income

20
Q

Dividends

A

Payments to stockholders from a corporation’s profits 

21
Q

Retained Earnings

A

Amounts left over from profitable operations since the firm’s beginning

Equal to total profits – all dividends paid to stockholders 

22
Q

IPO

A

Offering shares of a private corporation to the public in a new stock for the 1st time.

23
Q

Venture Capital

A

Money, technical, or managerial expertise provided by investors to startup firms with long-term growth potential.

24
Q

Accounting vs. Finance

A

Those who work in finance typically focus on planning and directing the financial transactions for an organization, while those who work in accounting focus on recording and reporting on those transactions.

25
Q

GAAP

A

Set of accounting rules, standards, and procedures issued and frequently revised by the Financial Accounting Standards Board (FASB).

26
Q

International Financial Reporting System (IFRS)

A

A standard set of accounting rules, standards, and procedures usually used by other countries

27
Q

SEC purpose

A

Enforces the law against market manipulation

28
Q

SEC Things

A

Annual reports (10-K) 

Public Company Reports (8-K) 

Quarterly Reports (10-Q)

Bankruptcy 

Change in public accountants 

Sets disclosure requirements for topics in 10-Ks and 10-Qs and how it’s presented 

Companies cant make false claims or leave out information 

Does NOT vouch for the accuracy of a 10-K or 10-Q 
- CEO and CFO must certify accuracy 

29
Q

Management Discussion and Analysis (MD&A)

A

Narrative explanation of a company’s financial performance/condition 

Provides context for financial statements 

Risks facing the company

30
Q

Key Sections of the Annual Report

A

Management Discussion and Analysis (MD&A), External auditor’s report, Financial statements (Footnotes)

31
Q

Financial statements (Footnotes)

A

Discloses the accounting policies that are most important to portraying the company’s financial condition and results

32
Q

Case: Funko

A

Seeing lower returns this year compared to 2021 and 2022 (not profitable/in the red)

Has too much inventory -> destroying $30M worth of product

Gross margin dec. b/c pf inc. warehouse operations & freight/storage costs

Shows that Amount of Inventory and Cash Balance are inversely related

Comm 1800 (12 decks)

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