View
- Term
- Definition
- Both Sides
Study
- All (87)
Shortcut Show
Next
Prev
Flip
MANGMT 1010: EXAM 2
Finance is |
the study of how people and businesses evaluate investments and raise capital to fund them |
What long-term investments should the firm undertake? |
What long-term investments should the firm undertake? |
How should the firm raise money to fund these investments? |
Capital Structures |
How can the firm best manage its cash flow as they arise in its day-to-day operations? |
working capital management |
A key component of finance is.. |
the management and interpretation of the information. |
Financial Markets |
institutions that facilitate financial transactions |
Three types of business organizations.. |
sole proprietorship, partnership, and corporation. |
Sole proprietorship.. |
business owned by a single individual who is liable for everything. (Sole Owner) |
General Partnership.. |
same as sole proprietorship but with more than one owner, so everything is split. |
Equity |
ownership |
Shares.. |
units of ownership |
(Limited Partnerships) General Partner: |
runs the business and faces unlimited liability for debts |
(Limited Partnerships) Limited Partner: |
Can only be help liable for the amount the limited partner invested. |
Corporation... |
functions financial apart from the owners. Owned by stockholders. |
Shareholders... |
stockholders |
Dividends. |
distributions of a portion of company's earnings decided by the Board of Directors |
Limited Liability Company (LLC)... |
a cross between partnership and corporation. No liability of personal belongings and no double taxation |
Chief Financial Officer (CFO)... |
responsible for managing the firm's financial affairs. Oversees it all. |
Maximizing Shareholder Wealth can be achieved by.. |
maximizing the stock price. |
Agency Problem.. |
the conflict of interest between the stockholders and the managers of a firm |
Sarbanes-Oxley Act (SOX)... |
protects investors by improving the accuracy and reliability of corporate disclosures |
Four Principles of Finance.. |
Money has a time value, there is a risk-return tradeoff, cash flows are the source of value, and market prices reflect information |
Money have a time value.. |
a dollar today is worth more than a dollar in a year (interest) |
There is a risk-return tradeoff. |
investors wont take on addition risk unless there is a higher "expected" return rate |
Cash Flow.. |
the amount of money that can actually be taken out of the business over the same interval. |
Cash Flows are the Source of Value.. |
ash flows represent actual money that can be spent and determines an investor's value |
Market Prices Reflect Information. |
investors respond to new information by buying and selling their investments. |
Capital Budgeting.. |
the decision-making process used to analyze potential investments in fixed assets |
Capital Structure.. |
the mix of long-term sources of funds used by the firm. |
Forensic Accounting.. |
the use of accounting for legal purposes |
Financial Accounting Standards Board (FASB) |
determines financial and accounting standards |
Accounting.. |
system for collecting, analyzing, and communicating financial information |
Bookkeeping.. |
recording of accounting transactions. |
Accounting Information System (AIS).. |
identifying, measuring, recording, and retaining financial info. for use in accounting statements |
Controller.. |
person who manages all of the firm's accounting activities (Chief Accounting Officer) |
Financial Accounting.. |
concerned with external users of a company's financial information. |
Two fields of accounting.. |
financial and managerial |
Managerial Accounting.. |
serves internal users of a company's financial information |
Certified Public Accountants (CPAs).. |
accountant licensed by the state and offering services to the public. |
Audit.. |
examination of company's accounting system to determine whether its financial reports reliable to its operations |
Generally Accepted Accounting Principles (GAAP).. |
accounting guidelines that govern the content and form or financial reports |
Tax Services.. |
assistance provided by CPAs for tax preparation and tax planning. |
Management Advisory Services.. |
assistance provided by CPA firms in areas such as financial planning, info systems and design |
Core Competencies for Accounting.. |
combination of skills, technology, and knowledge that will be necessary for the future CPA. |
Private Accountant.. |
salaried accountant hired by a business to carry out its day-to-day financial activities |
Management Accountants.. |
accountant who provides financial services to support managers in various business activities within a firm |
Certified Management Accountant (CMA).. |
professional designation awarded in recognition of management accounting qualifications |
Certified Fraud Examiners (CFE).. |
award for qualifying for a specialty area within forensic accounting. |
The Sarbanes-Oxley Act of 2002 was enacted to.. |
restore public trust in corporate accounting practices |
Accounting Equation.. |
Assets= Liabilities + Owner's Equity |
Asset.. |
any economic resource expected to benefit a firm. (Land, buildings, equipment) (Accounts Receivable) |
Liability.. |
debt owned by a firm to an outside organization |
Owners Equity.. |
amount of money that owners would receive if they sold all the assets and paid off all the liabilities. |
Net Worth... |
or Owners Equity.the difference between what what a firm owns (assets) and what is owes (liabilities) |
Financial Statements.. |
any of several types of reports summarizing a company's financial status to stakeholders |
Balance Sheets.. |
supply detailed information about a firms assets, liabilities, and owner's equity |
Current Assets.. |
can be converted to cash within a year |
Liquidity.. |
ease with which an asset can be converted into cash |
Fixed Assets. |
long-term use or value |
Depreciation.. |
decreasing value of a product over tim |
Intangible Assets.. |
nonphysical asset, patent or trademark, that has economic value in the form of expected benefit |
Goodwill.. |
amount paid for an existing business above the value of its other assets |
Current Liabilities.. |
debts that must be paid within a year |
Accounts Payable.. |
unpaid bills, wages, and taxes that must be paid within a year |
Long-Term Liabilities.. |
debts that are not due for at least a year. |
Paid-In Capital.. |
money that is invested in a company by its owners |
Retained Earnings. |
net profit that is kept by the owners rather than paid in dividend payments to stockholders. |
Income Statements (Profit-Loss Statement).. |
lists a firm's annual revenues and expenses so the bottoms line shows a profit or a loss |
Revenues. |
the funds that flow into a business from the sale of goods and services |
Cost of Revenue.. |
costs that a company receive to obtain revenues from other companies |
Costs of Goods Sold... |
costs of obtaining materials for making the products sold by a firm during the year. |
Gross Profit. |
firm's revenue minus its cost of revenues. |
Operating Income.. |
gross profit minus operating expenses |
Net Income (Net Profit)... |
gross profit minus operating expenses and income taxes |
Operating Expenses.. |
costs, other than the cost of revenues |
Statements of Cash Flow.. |
financial statements showing a firm's yearly cash receipts and cash payments |
Budget.. |
detailed statement of estimated receipts and expenditures for a future period of time |
Revenue Recognition.. |
formal recording and reporting of revenues at the appropriate time |
Full Disclosure. |
statements should not include just numbers but also managements interpretations and explain those numbers |
Solvency Ratios.. |
for estimating short-term and long-term risk (debt) |
Profitability Ratios.. |
for measuring potential earnings |
Activity Ratios.. |
evaluating managements use of assets |
Short-Term Solvency Ratios.. |
company's ability to pay immediate debts |
Current Ratio... |
company's ability to pay current debts out of current assets |
Leverage.. |
ability to finance an investment through borrowed funds |
Earning per Share.. |
measures the net profit that the company earns for each share of outstanding stock |
Activity Ratios.. |
how efficiently company is using resources |