Flashcards in Exam 2 (ch. 6,8-10) Deck (37):
Franchising is being used by companies to move into the foreign market
A corporation is a voluntary agreement where two or more people run a business for profit.
Do preferred stockholders have the right to vote at a stockholders meeting?
A general partnership can have as many partners as it wants.
A franchise agreement exempts the franchisee from making any form of payment to use the franchisors products
Does the owner of a sole proprietorship share any after-tax profits with the shareholders?
What constitutes a sole proprietorship?
A single owner who manages company
Company profit serves as owners income, company debts serve as owner debt
General Partnership vs. Sole Proprietorship
-2 or more partners
-unlimited liability for any claims against firm
Owners take active role in managing business
What happens in a Verticle Merger?
Combo of firms that are at different stages in production of a good or service.
Creates a buyer-seller relationship
general vs. limited partners
at least 1 general partner actively manages business,accepts unlimited liability.
limited partner gives up right to actively manage in exchange for limited liability.
What takes place in Lateral Expansion?
Duties of the Board of Dorectors
To est. corporations mission and set broad objectives.
Monitors Ceo performance
Offers advice to CEO
Approves major proposals
Makes sure company adheres to major requirements
The operating budget of a business represents the overall action plan for that business for a specified time period.
Horizontal analysis enables managers to make comparisons of financial statements.
Is the Financial Standards Board barred from modifying and expanding the Generally Accepted Accounting Principles (GAAP)?
No, it's one of their jobs
One of the functions of financial managers is to prepare customized reports of the cost overruns of a companies production facilities
A balance sheet provides info on what a company owns and owes
Yes, reports assets, liabilities, and owners equity.
The Securities and Exchange Commission (SEC) bans publicly traded corporations from making comparative financial statements.
False, it requires them to
What does it mean when company is involved in financial accounting?
Prepare financial statements for use by owners, creditors, suppliers, and external stakeholders
difference between revenue and expenses in a given period of time
Internal Auditor function
assesses how efficient company's business practices are
How to calculate owners equity.
owners equity= assets-liabilities
Revenues recognized on income statements when cash is earned, not received.
Companies debts or obligations due in the next year & appear on company's balance sheet
term loans carry lower interest rates than commercial paper
restriction placed on borrower by a lender as a condition of providing long term debt
sometimes liability insurance
When you buy a Certificate of Deposit the terms are that the funds must remain for a fixed period of time
Statement that forecasts the types/amounts of assets a firm will need in the future
Budgeted balance sheet
dividing a firms current liabilities by total assets will give you
how much income a firm earned per share of common stock outstanding is indicated by
Earnings per share (EPS)
a trade credit of 1/10 net 30 days means you get a 10% discount if you pay the invoice in 20 days
false, 1% discount
Financial managers should only focus on short term financial issues
what info does inventory turnover ratio provide?
How many times a company has been sold and replaced over a certain period
what info does leverage ratio provide?
measures the extent to which a firm relies upon debt financing in its capital structure
what info does Profitability ratios provide
measures rate of return a firm earns on various measures of investments
net income-preferred dividends