Ch.13 Financial Management Flashcards
(49 cards)
Why do business owners use financial statements?
They’re invested in the business
Why does the board of directors use financial statements?
elected to oversee operations and business decisions
Why do managers use financial statements?
concerned with addressing daily and long -term success of decisions
Why do creditors use financial statements?
concerned with payment obligations will be met when money/goods are lent to organization
Why do employees use financial statements?
Assess company’s ability to meet wage and benefit demands
Why do governmental agencies use financial statements?
concerned with financial data related to taxation and regulation
Define a private company
- owned by non-governmental organizations/ relatively small number of shareholders
- does not offer company stock to the general public
- more leeway regarding transparency
define public company
- issued/ sold portion of itself to public through public shareholding. - Public companies, not-for-profit organizations and public sector organizations, particularly governments are held to higher standard of accountability than a business.
- financial statements must be made publicly available
How does not for profits accounting work?
do not operate for anyone’s personal financial gain. Excess revenues over expenses are not distributed to those who contributed to support through taxes or voluntary donations, but are used to further the purposes of the organization.
What is a balance sheet?
statement of assets, liabilities/debts, capital/owner’s equity at a given time or at end of accounting period
what kind of statement is a balance sheet and why
static statement
- because it presents the financial position at a specific date or time
what kind of statement is the income statement and why?
flow/dynamic statement bc operating results over time are presented
what are current assets?
cash and all assets that will be converted into cash in a year
what are long term assets?
those of permanent nature, most required to generate revenues for business; not intended for sale
what are examples of long term assets?
-land
-buildings
-furniture/equipment
(goes through accumulated depreciation)
what are examples of current assets?
-cash
-accounts receivable (or expected to receive)
-inventory
-prepaid expense (insurance, rent)
Define liability
obligation of the company- amounts owed to creditors for a past transaction
what is a current liability?
those that must be paid within a year, including items as accounts payable for merchandise
what are accrued expenses? Give examples
part of accounts payable and are due but not paid at end of accounting period
eg. salaries, wages, interest
What are fixed or long term liabilities? give example
obligations that will not be paid within current year.
eg. bank loan, mortgage for building/land
what are examples of current liabilities?
- accounts payable
- interest payable
- tax payable
define internal standard of comparison
evaluate performance compared to budgeted performance, past performance, pre-established department standards, or other metrics within an organization
define external standard of comparison
evaluate performance compared to similar operations/industry performance
what are fixed costs? give examples
expense items that don’t vary with sales volume and are always expressed in dollars.
eg. cleaning, insurance, rent, property tax
