MANGMT 1010: Exam 2
48 Cards in this Set
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Asset
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any economic resources expected to benefit a firm or an individual who owns it.
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Liability
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a debt owned by a firm to an outside organization or individual.
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Owners' Equity
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the amount of money that owners would receive if they sold all of a firm's assets and paid all of its liabilities.
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Common Stock
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a form of corporate equity ownership, a type of security. Among the riskiest of all securities
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Par Value
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face value of a share of stock at the time it is originally issued, when it first comes out.
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Market value
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the current price of a share in the stock market, what investors are willing to pay, equilibrium price.
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Book Value
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the value of a common stock expressed as total shareholders' equity divided by the number of shares of stock. Measures the relative value worth at a given moment, # of stocks lower then market value what the firm will do in the future.
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Blue-chip stock
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A blue chip stock is the stock of a well-established company having stable earnings and no extensive liabilities.
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Bond
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security through which an issuer promises to pay the buyer a certain amount of money by a specified future date.
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Government Bond
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issued by the federal government, lowest risk.
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Municipal Bond
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issued state or local government, do not pay tax on interest.
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Corporate Bond
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issued by a company as a source of long-term funding, most common - cover more $$ than government and municipal bonds combined. Longer maturity = higher yield = more risk
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Accounting
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is a comprehensive system for collecting, analyzing adn communicating financial information. This field has changed so much.
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Bookkeeping
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Bookkeeping is the recording of financial transactions.
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Accounting Information System
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An accounting information system (AIS) is the system of records a business keeps to maintain its accounting system. Organized means by which financial information is recorded and retained for use in accountings statements and management reports.
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Controller
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Top Dog, person who manages all of a firm's accounting activities (chief accounting officer)
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Financial accounting system
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concerned with external information users (tax payers, investors and government agencies)
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Managerial/Management
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accounting system serves internal users. Internal users are managers and employees, aids managerial decision making
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Certified Public Accountant CPA
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accountant licensed by the state and offering services to the public, outside accountant.
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Audit
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systematic examination of a company's accounting system to determine whether its financial reports fairly represent its operations, financial reports are GAP: general accountnating practices
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Accounting equation
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assets = liabilities + owners equity
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Asset
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an economic resource expected to benefit a firm or an individual who owns it.
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Liability
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is a debt owned by a firm to an outside organization or individual.
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Owners equity
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the amount of money that owners would receive if they sold all of a firm's assets and pain all of its liabilities.
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Balance sheet
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supply detailed information about the accounting equation factors. One point in time.
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Current assets
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accounts receivable, tangible
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Fixed assets
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land, factory, equipment
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Intangible assets
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non-monetary assets that cannot be seen, touched or physically measured, patents and trademarks.
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Current Liabilities
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account payable
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Long-term Liabilities
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outstanding payable for greater then one year.
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Income statement (profit and loss statement)
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lists a firm's annual revenues and expenses so that a bottom line shows annual profit or loss. A video showing what has happened.
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Revenues
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profit + cost
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Statement of cash flows
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describes a firm's yearly cash receipts and cash payments with three activities; cash flow from operations, cash flow from investing, cash flow from financing.
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Revenue recognition
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is the formal recording and reporting of revenues in financial statements.
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Matching
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a principle stating that expenses will be matched with revenues to determine net income for an accounting period
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Full Disclosure
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means that financial statements should not include just numbers.
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Solvency ratios
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both short and long term, estimate risk made up of debt ratio and liquidity ratio
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Liquidity ratio
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short-term solvency ratios, measures a firm's ability to pay its immediate debts.
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Current Ratio
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current assets/current liabilities
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Debt Ratio
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long-term solvency ratio, measures a firm's ability to meet its long-term debts.
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Leverage
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ability to finance investments through borrowed funds.
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Profitability ratios
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measures a potential earning
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Return on Equity
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measure income for each dollar invested
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Earnings per share
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measures the size of the dividend that a firm can pay shareholders.
net income/# of shares outstanding
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Activity Ratios
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reflect management's use of assets
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Inventory Turnover Ratio
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measures the average number of times that inventory is sold and restocked during the year.
High turnover is a good thing, you don't want to hold inventory for a long time Hallmark example
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International Transactions
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international purchases, credit sales and accounting for foreign subsidiaries all involve transactions affected by exchange rates.
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International Accounting Standards
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the international accounting standards board (IASB) tried eliminating national differences in financial reporting procedures.
This is extremely important.
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MANGMT 1010: Exam 1