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BUS 2000 > Test #2 (Chapters 17-20) > Flashcards

Test #2 (Chapters 17-20) Flashcards

(60 cards)

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1
Q

what is the accounting cycle in order?

A
  1. analyze source documents (sales slips, travel records, etc)
  2. record transactions in journals
  3. transfer (post) journal entries to ledger
  4. take a trial balance
  5. prepare financial statement (balance sheet, income statement, and statement of cash flows)
  6. analyze financial statements
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2
Q

What is the accounting equation?

A

assets = liabilities + owners equity

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3
Q

Public accounting

A

providing accountant services ( you are either an accountant or part of a firm that helps everyone, prepare taxes for public)

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4
Q

Private Accounting

A

you work for the company - focus on financial operations of a single company

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5
Q

financial accounting

A

recording and reporting historical financial data to external stakeholders - External focus (investors, government), follows GAAP, reports past performance

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6
Q

Managerial accounting

A

internal financial information to help managers make decisions and plan for the future - Internal focus (managers), flexible methods, helps decision-making​

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7
Q

liquidity ratio

A

measures short term financial health (ex: current ratio)

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8
Q

profitability ratio

A

measures profit generation (example: return on equity)

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9
Q

assets

A

resources owned (cash, inventory & equipment)

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10
Q

liabilities

A

debts owed (loans, accounts payable)

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11
Q

owners equity

A

value remaining after liabilities are deducted

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12
Q

intangible assets

A

patents, trademarks, copyrights, and goodwill (brand value)

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13
Q

income statement

A

tracks revenue, expenses, and profit over time

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14
Q

formula for net income

A

revenue - expenses = net income

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15
Q

what is bookkeeping?

A

basic recording of transactions

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16
Q

what is accounting?

A

interprets financial data, prepares reports, and advises management

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17
Q

What are the jobs of financial managers?

A
  • to manage company funds, plan investments, handling budgets, and managing risks
  • ensure taxes are paid correctly and on time
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18
Q

what is debt financing?

A

borrowing money via loans or bonds

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19
Q

what is equity financing?

A

selling company ownership through stocks

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20
Q

what is the budgeting concept?

A

planning future income and expenses to ensure financial stability

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21
Q

what is capital budgeting (long-term investments)?

A

the decision-making process for purchasing expensive assets like machinery and property

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22
Q

what is factoring?

A

selling accounts receivable to a third party at a discount for immediate cash

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23
Q

how is the time value of money?

A

money today is worth more than the same amount in the future because you can invest and get more money in the long-run and inflation

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24
Q

what is the 2-10-30 concept?

A

likely refers to payment terms where a discount is available if payment is made within a certain period (if paid within 10 days, company would save 2%)

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25
What is trade credit?
businesses purchase goods or services and pay later, helping with cash flow
26
What is equity financing?
raising money by selling company shares instead of borrowing
27
What are stocks?
selling shares to investors for funding
28
what are retained earnings?
using past profits instead of borrowing
29
what are venture capitalists?
investors who fund startups in exchange for ownership
30
what are unsecured bonds (venture bonds)?
bonds issued without collateral, meaning higher risk and interest rates
31
what are income stocks?
stocks that pay regular dividends to shareholders
32
what is a primary market?
when companies sell stocks directly to investors (IPO - initial public offering)
33
What is a secondary market?
when investors trade stocks with each other (stock exchange)
34
what is market order?
buying or selling a stock at the current market price
35
what is the relationship between bond prices and interest rates?
inverse relationship: when interest rates fall, bond prices rise
36
what are stock splits?
when a company increases the number of shares to make stock more affordable
37
what is margin trading?
borrowing money from a broker to invest in stocks
38
what is equity financing?
no repayment but reduces ownership
39
what is debt financing?
must repay but keeps ownership intact
40
what are convertible bonds?
bonds that can be converted into company stocks
41
what is liquidity?
how easily an asset can be converted to cash without losing value
42
what is principal?
the original loan amount
43
what is interest?
the cost of borrowing
44
What is high risk, high return (junk bonds)?
high-yield bonds with a higher risk of default but potentially high returns
45
what does the federal reserve bank do (cash flows)?
they regulate money supply and interest rates to stabilize the economy
46
what are the 4 money characteristics?
1. portability - easy to carry 2. durability - long-lasting 3. divisibility - can be broken into smaller units 4. stability - maintains value over time
47
what is ratio analysis?
a financial tool used to evaluate a company's performance through its financial statements
48
what is cash budgeting?
a financial plan that estimates cash inflows and outflows over a short period (monthly, quarterly, or yearly) - purpose is to ensure a company has enough liquidity to cover daily operations & manage short-term expenses
49
cash inflows include...
sales revenue, accounts receivable, loans
50
cash outflows include...
salaries, rent, utilities, & inventory purchases
51
what is capital budgeting? (long-term focus)
the process of evaluating and selecting long-term investments in assets like machinery, buildings, and technology purpose: helps businesses decide which large projects will provide future profits & benefits
52
what is limit order?
an instruction to buy or sell a security at a specific price or better.
53
Dow Jones Stock
- started with 12 companies in 1896 & expanded to 30 in 1928
54
what are investment options?
stocks, bonds, mutual funds, exchange-traded funds (ETFs), real estate, etc.
55
what is a line of credit?
flexible loan from a financial institution that allows businesses or individuals to borrow up to set limit as needed, rather than taking a lot.
56
What is M1 money supply?
money that is readily available for transactions (includes physical cash, checking accounts, etc)
57
What is M2 money supply?
includes M1 plus assets that are not immediately liquid but can be converted to cash easily
58
What are the 3 different meanings of the Federal Reserve?
1. central bank of the U.S. - the fed regulates and supervises banks to ensure financial stability 2. monetary policy authority - controls the money supply and interest rates to manage inflation, employment, and economic growth 3. lender of last resort - provides emergency funding to banks during financial crises to maintain confidence in the banking system.
59
what are the main standards for a useful form of money?
1. durability 2. portability 3. divisibility 4. fungibility 5. acceptability
60
what is a balance sheet?
a snapshot of company's financial statement at a specific point in time that includes assets, liabilities, and equity.

BUS 2000 (1 decks)

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