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SOM 122 > Final VITs > Flashcards

Final VITs Flashcards

(85 cards)

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1
Q

Accounting equation

A

Assets = Liabilities + Owners Equity

Used by accountants to balance data for the firms financial transactions at various points in the year

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2
Q

Accounts payable

A

Current liabilities consisting of bills owed to suppliers, plus wages and taxes due within the coming year

Current liabilities a firm owes for merchandise or services purchased on credit

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3
Q

Activity ratio

A

Financial ratio for evaluating managements efficiency in using a firm’s asset

Fixed assets turnover = revenue / fixed assets

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4
Q

Asset

A

Any economic resource expected to benefit a firm or an individual who owns it

Economic resources owners by a firm, items can be tangible or intangible

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5
Q

Balance sheet

A

Financial statement that supplies detailed financial information about a firm’s assets, liabilities, and owners equity

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6
Q

Costs of revenues

A

the total cost of manufacturing and delivering a product or service.

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7
Q

Current liability

A

Debt that must be paid within one year

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8
Q

Current assets

A

Asset that can or will be converted into cash within a year

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9
Q

Depreciation

A

Accounting method for distributing the cost of an asset over its useful life

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10
Q

Fixed asset

A

Asset with long-term use or value, such as land, buildings, and equipment

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11
Q

Goodwill

A

Goodwill is created when one company acquires another for a price higher than the fair market value of its assets; for example, if Company A buys Company B for more than the fair value of Company B’s assets and debts, the amount left over is listed on Company A’s balance sheet as goodwill.

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12
Q

Intangible asset

A

Nonphysical asset, such as a patent or trademark, that has economic value in the form of expected benefit

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13
Q

Income taxes

A

Tax levied by the government directly on income, especially an annual tax on personal income

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14
Q

Liability

A

Debt owed by a firm to an outside organization or individual

What the business owes to others - its debts

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15
Q

Liquidity

A

Ease with which an asset can be converted into cash

Current ratio = current assets / current liabilities

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16
Q

Long-term liability

A

Debt that is not due for at least one year

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17
Q

Net income / profit / earnings

A

Gross profit minus operating expenses and income taxes

The revenue left over after costs and expenses

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18
Q

Operating expenses

A

Costs, other than the cost of revenues incurred in producing a good or service

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19
Q

Operating income

A

Gross profit minus operating expenses

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20
Q

Owners equity

A

Amount of money that owners would receive if they sold all of a firm’s assets and paid all of its liabilities

The amount of the business that belongs to the owners minus any liabilities of the owners

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21
Q

Paid-in capital

A

Money that is invested in a company by its owners

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22
Q

Profitability ratio

A

Financial ratio for measuring a firm’s potential earnings

Return on sales = net income after taxes / net sale

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23
Q

Retained earnings

A

Earnings retained by a firm for its use rather than paid out as dividends

Accumulated earning from the firm’s profitable operations that are reinvested in the business

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24
Q

Revenues

A

Funds that flow into a business from the salve of goods or services

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25
Solvency ratio
Financial ratio, either short or long term, for estimating the borrowers ability to repay debt Short term - liquidity Long term - solvency
26
Statement of cash flows
Financial statement describing a firm’s yearly cash receipts and cash payments Related to the three major activities of a firm: 1. Operations 2. Investments 3. Financing
27
Gross profit
Preliminary, quick - to - calculate profit figure calculated from the firm’s revenues minus its cost of revenues (the direct costs of getting the revenues)
28
Income statement / profit & loss statement
Financial statement listing a firm’s annual revenues and expenses that s bottom line shows annual profit or loss
29
Bear market
Period of falling stock prices marked by negative investor sentiments with motivation to sell ahead of anticipated losses
30
Bull market
Period or rising stock prices, lasting 12 months or longer, featuring investor confidence for future gains and motivation to buy
31
Compound growth
Compounding of interest over time - with each additional time period, interest returns accumulating and earn more interest
32
Dividend
Payments to shareholders, on a per-share basis, out of the company’s earnings
33
Dow Jones Industrial Average (DJIA)
Oldest and most widely cited market index based on the prices of 30 blue chip, large-cap industrial firms on the New York stock exchange
34
Investment bank
Financial institution that specializes in issuing and reselling new securities
35
Market index
Statistical indicator designed to ensure the performance of a large group of stocks or track the price changes of a stock market
36
NASDAQ composite index
Market index that includes all NASDAQ listed companies, both domestic and foreign, with a high proportion of technology companies and small - cap stocks
37
Securities markets
Markets in which stocks and bonds are sold
38
Primary securities market
Market in which new stocks and bond are bought and sold by firms and governments
39
Secondary securities market
Market in which existing stocks and bonds are sold to the public
40
Securities and exchange commission (SEC)
Government agency that regulates US securities markets
41
Stock quotation
The price of stock as quoted on an exchange
42
Time value of money
Principle that inverted money grows, over time, by earning interest or some other form of return Money received sooner is more valuable than money received later
43
Common stock
Most basic form of ownership, including voting rights on major issues, in a company
44
Preferred stock
Stock that entitles the holder to a fixed dividend, whose payment takes priority over that of common stock dividends
45
Blue-chip stock
Common stock issues by a well established and respected company with a sound financial history and a stable pattern of dividend payouts
46
Income stock
Equity security that pays regular, often steadily increasing dividends
47
Growth stock
A company stock that tends to increase in capital value rather than yield high income
48
Book value
Value of a common stock expressed as the firm’s owners equity divided by the number of common shares The difference between the assets and liabilities, on a per share basis
49
Market value
Current price of a share of stock in the stock market
50
Price earnings ratio (P/E ratio)
The comparison of a firm’s current share price of its current earnings per share The market value per share divided by the earnings per stare
51
S&P 500
Market index of US equities based on the performance of 500 large-cap stocks representing various sectors of the overall equities market
52
Chief financial officer
A senior executive with responsibility for the financial affairs of a corporation or other institution
53
Treasurer
A person appointed to administer or mange the financial assets and liabilities of a society, company, local authority, or other body
54
Controller
A person who manages all of a firm’s accounting activities
55
Commercial bank
Company that accepts deposits that it uses to make loans, earn profits, pay interest to depositors, and pay dividends to owners
56
Investment bank
Financial institution that specializes in issuing a reselling new securities
57
Hedge fund
A limited partnership of investors that used high risk methods, such as investing with borrowed money, in hopes of realizing large capital gains
58
Financial management
1. Balancing short-term and long-term demands 2. Balancing potential risks and potential rewards 3. Balancing leverage and flexibility
59
Financial planning
Process of looking at ones current financial condition, identifying ones goals, and anticipating requirement for meeting those goals
60
Financial plan
A comprehensive evaluation of an investors current and future financial state by using currently known variables to predict future cash flows, asset values and withdrawal plans
61
Internal sources of funds
Finance from inside the business
62
External sources of funds
Finance from outside the business
63
Start-up budget
An itemized list of income and expenses for a new business, which often covers the period up to commencing operations and perhaps a small amount of time after operations have commenced
64
Operating expenses
Costs, other than the cost of revenues, incurred in producing a good or service
65
Capital
Funds needed to create a operate a business enterprise
66
Accounts receivable
Money owed to a company by its debtors
67
Currency (cash)
Government-issued paper money and metal coins
68
Inventory
A complete list of items such as property, goods in stock, or the contents of a building
69
Debt
Company’s total liabilities
70
Equity
The value of the shares issued by a company
71
Ratio analysis
The assessment of a firm’s financial condition using calculations and financial ratios developed from the firms financial statements
72
Leverage ratios
Measure the degree to which a firm relies on borrowed funds in its operations Debt to owners equity ratio = total liabilities / owners equity
73
Finance
The study of how money is managed and the actual process of acquiring needed funds
74
Investment banks
Advise companies in major financial transactions, such as buying and selling companies or divisions, and raising new capital by issuing stock or bonds
75
Brokerage firms
Bring buyers and sellers together in order to facilitate transactions, often providing advice to their clients
76
Bulge bracket banks
The worlds largest and most profitable multi-national investment banks who clients are usually large corporations, institutions, and governments
77
Mutual insurance company
Owned entirely by its policyholders; any profits earned are revered to policyholders in the form of dividend distributions or reduced future premiums
78
Stock insurance company
Owned by investors who have purchased company stock; any profits generated are distributed to the investors without necessarily benefiting the policyholders
79
Compound growth
Compounding of interest over time - with each additional time period, interest returns accumulate
80
Rule of 72
The approximate the number of years needed to double your money by dividing the annual interest rate (in percent) into 72
81
Income stock
Stocks purchased primarily for dividend payouts rather than capital gains potential; companies tend to be older, stable firms with fairly predictable profits but lower prospects for growth
82
Cyclical stock
Stocks from companies whose earnings tend to track the ups and downs of the economy in a predictable pattern - their revenue and profits grow as the economy grows and shrink as the economy shrinks; many of these companies are in basic industries like housing a transportation
83
Defensive / counter-cyclical stock
Stocks of companies that tend to fare better when the economy is doing worse and vise versa; for example, new dad sales decline in a falling economy buy car repair businesses usually increase revenue as people try to hang onto their cars for longer
84
Large cap, mid cap, small cap stock
General designations for the size of a company’s market capitalization (the market value of its stock multiplied by the number of shares in circulation); small caps tend to be higher-risk, higher-reward caps than larger caps, with mid caps somewhere in between - but these are averages over time, not predictable for specific stocks
85
Penny stock
Stocks that sell for less than on dollar per share or, more generally stocks that are highly speculative (risky, but with upside potential) tend to be from newer companies or established companies whose stock has plummeted for some reason

SOM 122 (2 decks)

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