Accounting Test 3Vocab1) Annuity – include multiple investments of an equal periodic amount at fixed intervals over the length of the investment. Cash payments of equal amounts over equal time periods.2) Compound Interest – interest you earn on the initial investment AND on previous interest.3) Simple Interest – interest you earn on the initial investment only.4) Company Investments – to earn a return, ensure a supply of raw materials, influence a board of directors, diversify their product offering, less expensive than R&L.A) Debt Securities (Bonds) – Provide interest revenueB) Equity Securities – Provide dividend income and appreciation of stock.5) Treasure Stock – stock that a company reacquires from stockholders. No longer considered outstanding stock, considered issued. Contra-Equity Account.6) Outstanding Stock – number of shares that have been issued and are still held bysomeone other than the issuing company. Excludes treasury shares.7) Issued Stock – Number of shares a company has distributed to owners to date.8) Common Stock – most common type of capital stock; Grants stockholders rights.9) Par Value – an arbitrary value (number decided upon/created by the company). Determines an entity’s legal capital (amount state requires corporation to maintain to protect from creditor claims). Assigned per share of stock.10) Present Value – the value today of receiving some larger amount in the future. Computing a present value – “discounting”.11) Future Value – How much an amount today will grow in the future.12) Date of Declaration – date on which the board declares the dividend and a liability is created. Company is obligated to pay.13) Date of Record – Date on which those who receive dividends are identified. Whoever owns stock on date of record receives dividend. No journal entry.14) Payment Date – date which payment is distributed (checks cut).15) Stock Dividends – distribution of a company’s stock to existing shareholders. Ex: 10% stock dividend = owner receives 10% of current outstanding shares (owns 10,000 = receives 1,000). - Small stock Dividend < 25% </= Large Stock Dividend-Record at Market Value -Record at Par Value16) Preferred Stock – form of capital stock that receives one or more priorities over common stock. -Gives up voting rights in exchange for preference to dividends & liquidation of assets 17) Contributed Capital – Amount raised by issuing capital stock.18) Additional Paid-In Capital (APIC) – portion of cash proceeds above par value.19) Securities Available for Sale (SAS) – Securities neither expected to be sold norheld to maturity (Debt & Equity).20) Trading Securities – securities that the investor expects to sell in the near future. 21) Held – To –Maturity Securities – Securities that an investor expects to hold until they mature (Debt Securities only).22) Operating Activities Section – cash effect of transactions & events that enter into the determination of net income.23) Direct Method – calculates cash flow from operations by determining cash receipts from customers and subtracting cash disbursements to suppliers, employees, etc.24) Indirect Method – calculates cash flow from operations by adjusting net income for non-cash revenues & expenses.25) Horizontal Analysis – calculates the change in an account balance over time from one period to the next. Analyzed trends in financial statement data for a single company over time.26) Vertical Analysis – comparison of financial balances to a base amount from the financial statements. Expresses each item in a financial statement as a % based on the amount.27) Ratio Analysis – comparison of different balances from the financial Statements.28) Operating Cash Flow – cash flow related to selling goods/services. Principle business of the company.29) Investing Cash Flow – Cash flow related to the acquisition or sale of noncurrentassets.30) Financing Cash Flow – long term & short-term cash flows related to liabilities and owner’s equity – dividends are a financial cash