Chapters 14, 15, & 16 Flashcards Preview

General Business 101-001 > Chapters 14, 15, & 16 > Flashcards

Flashcards in Chapters 14, 15, & 16 Deck (69):
1

accounting

recording, measurement, and interpretation of financial information

2

certified public accountant (CPA)

individual who has been certified by state to provide accounting services (preparation of financial records and filing tax returns - complex audits of corporate financial records)

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Private accountants

employed by lg corporations, gov. agencies, and other organizations to prepare and analyze their financial statements

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certified management accountants (CMAs)

private accountants who certified by national association of accountants and have managerial responsibility

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managerial accounting

internal use of accounting statements by managers in planning and directing the organization's activities

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cash flow

moment of money through organization over a daily, weekly, monthly, or yearly basis

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budget

internal financial plan that forecasts expenses and income over set period of time

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annual report

summary of firm's financial information, products, and growth plans for owners and potential investors

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assets

firm's economic resources, or items of value that it owns, (cash, inventory, land, equipment, buildings, and other tangible and intangible things)

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liabilities

debts that a firm owes to others

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owners' equity

equals assets minus liabilities and reflects historical values

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accounting equation

assets equal liabilities plus owners' equity

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double-entry bookkepping

system of recording and classifying business transactions that maintains the balance of accounting equations

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accounting cycle

4-step procedure of accounting systems: examining source documents, recording transactions in accounting journal, posting recorded transactions, and preparing financial statements

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journal

time-ordered list of account transactions

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ledger

book or computer file with separate sections for each account

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income statement

financial report that shows an organization's profitability over a period of time-month, quarter, or year

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revenue

total amount of money received from the sale of G & S and from related business activities

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costs of goods sold

amount of money a term spent to buy or produce products it wold during period income statement applies

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gross income (or profit)

revenues minus costs of goods sold required to generate the revenue

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expenses

costs incurred in day-to-day operations of organization
1. selling, general, and admin expenses
2. research development, and engineering expenses
3. interest expenses

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depreciation

process of spending costs of long-lived assets (buildings and equipment) over total number of accounting periods in which expected to be used

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net income
"net earnings"

total profit (or loss) after all expenses have been deducted

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balance sheet

"snapshot" of organization's financial position at given moment

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current assets

assets used or converted into cash w/in course of calendar year

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accounts receivable

money owned a company by clients or customers who have promised to pay for products at later date

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current liabilities

firm's financial obligations to short-term creditors (must replied within one year)

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accounts payable

amount a company owes to suppliers for G & S purchased w/ credit

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accrued expenses

all unpaid financial obligations incurred by organization

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statement of cash flow

explains how company's cash changed from beginning of accounting period to end

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ratio analysis

calculations measure organization's financial health

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profitability ratios

how much operating income or net income an organization is able to generate relative to its assets, owners' equity, and sales

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profit margin

shows overall percentage of profits earned by company
-dividing net income by sales

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return on assets

shows how much income the firm produces for every dollar invested in assets
-net income divided by assets

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return on equity

shows how much income is generated by each $1 owners have invested in firm
-net income divided by owners' equity

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asset utilization ratios

ratios that measure how well a firm uses its assets to generate each $1 of sales

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receivables turnovers

how many times a firm collects its accounts receivable in one year
-sales divided by account receivable

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inventory turnover

how many times a firm sells and replaces its inventory over year
-sales divided by total inventory

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total asset turnover

measures how well organizations use all of assets in creating sales
-sales divided by total assets

40

liquidity ratios

ratios that measure the speed which a company can turn its assets into cash to meet short-term debt

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current ratio

calculated by dividing current assets by current liabilities

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quick ration (acid test)

measure of liquidity because eliminates inventory

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debt utilization ratios

ratio measure how much debt in an organization is using relative to other sources of capital (owners' equality)

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debt to total assets ratio

indicates how much a firm is financed by debt and how much by owner's equity
-debt (total liabilities) divided by total assets

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times interest earned ratio

measure of the safety margin a company has w/respect to interest payments it must make to creditors
-operating income divided by interest expense

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per share data

data used by investors to compare performance of one company w/ another on equal, per share basis

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earnings per share

-net income or profit divided by number of stock shares outstanding

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dividends per share

actual cash received for each share owned

49

finance

study of money, how it's made, how it's lost, and how it's managed

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money

anything generally accepted in exchange for G&S

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money market accounts

accounts that offer higher interest rates than standard bank rates but with greater restrictions

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certificates of deposits (CDs)

savings accounts guarantee a depositor a set interest rate over specified interval as long as fuds are not withdrawn b/4 end of period (six months or one yr)

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Federal Reserve Board

an independent agency of federal government established in 1913 to regulate nation's banking and financial industry

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monetary policy

means by which Fed controls the amount of money available in economy

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open market operations

decisions to buy or sell U.S. Treasury bills (short-term debt issued by U.S. government) and other investments in open market

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reserve requirement

percentage of deposits that banking institutions must hold in reserve

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discount rate

rate of interest by Fed charges to loan money to any banking institution to meet reserve requirements

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credit controls

authority to establish and enforce credit rules for financial institutions and some private investors

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commercial banks

largest and oldest of all financial institutions
-mainly checking and saving accounts as sources of funds for loans to businesses and individuals

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savings and loan associations (S&Ls)

financial institution that primarily offer savings accounts and make long-term loans for residential mortgages "thrifts"

61

credit union

a financial institution owned and controlled by its depositors, usually have common employer, profession, trade group, or religion

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mutual savings banks

financial institutions similar to savings and loan associations but, like credit unions, are owned by their depositors

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Federal Deposit Insurance Corporation (FDIC)

insurance fund established in 1933 that insures individual bank accounts

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National Credit Union Administration (NCUA)

agency that regulates and charters credit unions and insures their deposits through its National Credit Union Insurance Fund

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insurance companies

businesses that protect their clients against financial losses from certain specified risks (death, accident, and theft)

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pension funds

managed investment pools set aside by individuals, corporations, unions, and some nonprofit organizations to provide retirement income for members

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mutual fund

an investment company that pools individual investor dollars, and invests them in lg. numbers of well diversified securities

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brokerage firms

firms that buy and sell stocks, bonds, and other securities for their customers, and provide other financial services

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investment banker

underwrites new issues of securities for corporations, states, and municipalities