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Flashcards in Chapter 3 Deck (32):
1

A position statement that presents an organized list of assets, liabilities, and equity at a particular point in time

Balance Sheet

2

Assets minus liabilities as shown in the balance sheet

Book Value

3

Period of time before an asset is converted to cash or until a liability is paid

Liquidity

4

The riskiness of a company with regard to the amount of liabilities in it's capital structure

Long-term Solvency

5

Period of time necessary to convert cash to raw materials, raw materials to finished products, the finished product to receivables, and receivables back to cash

Operating Cycle

6

Certain negotiable items that are highly liquid investments quickly converted to cash

Cash Equivalents

7

Investments not classified as cash equivalents that will be liquidated in the coming year or operating cycle, whichever is longer

Short-term Investments

8

Receivables resulting from the sale of goods or services on account

Accounts Receivable

9

Receivables supported by a formal agreement or note that specifies payment terms

Note Receivable

10

Goods awaiting sale, goods in the course of production, and goods to be consumed directly or indirectly in production

Inventories

11

Land, buildings, equipment, machinery, autos, and trucks

Property, Plant, and Equipment

12

Operational assets that lack physical substance (ie. Patents, copyrights, franchises, goodwill)

Intangible Assets

13

Expenses already incurred but not yet paid

Accrued Liabilities

14

The current installment due on long-term debt, reported as a current liability

Current Maturities of Long-term Debts

15

Invested capital consisting primarily of amounts invested by shareholders when they purchase shares of stock from the corporation

Paid-in Capital

16

A significant development that takes place after the company's fiscal year-end but before the financial statements are issued

Subsequent Event

17

Transactions with the owners, management, families of owners or management, affiliated companies, and other parties that can significantly influence or be influenced by the company

Related-Party Transactions

18

Intentional distortions of financial statements

Irregularities

19

Violations of the law, such as bribes, kickbacks, and illegal contributions to political candidates

Illegal Acts

20

Provides a biased but informed perspective of a company's operations, liquidity, and capital resources

Management Discussion and Analysis (MDA)

21

Report issued by CPAs who audit the financial statements that informs users of the audit findings

Auditor's Report

22

Contains disclosures on compensation to directors and executives; sent to all shareholders each year

Proxy Statement

23

Corresponding financial statements from the previous years accompanying the issued financial statements

Comparative Financial Statements

24

Comparison by expressing each item as a percentage of that same item in the financial statements of another year in order to more easily see year-to-year changes

Horizontal Analysis

25

Expression of each item in the financial statements as a percentage of n appropriate corresponding total, or base amount, but within the same year

Vertical Analysis

26

Comparison of accounting numbers to evaluate the performance and risk of a firm

Ratio Analysis

27

A company's ability to pay its obligations when they come due

Default Risk

28

How adept a company is at withstanding various events and circumstances that might impair its ability to earn profits

Operational Risk

29

Differences between current assets and current liabilities

Working Capital

30

Compares resources provided by creditors with resources provided by owners

Debt to Equity Ratio

31

By earning a return on borrowed funds that exceeds the cost of borrowing funds, a company can provide its shareholders with a total return higher than it could achieve by employing equity funds alone

Financial Leverage

32

A way to gauge the ability of a company to satisfy its fixed debt obligations by comparing interest charges with the income available to pay those charges

Times Interest Earned Ratio