Accounting for Business and Management (Chap 15 and 17) Flashcards
- implement firm’s financial plan
- determine most appropiate sources and uses of funds
Financial managers
- specified funds needed
- timing of inflows and outflows
- determines most appropriate sources and uses of funds
Financial plan
What questions is a financial plan built on?
- what funds are required during planning period?
- when will it need the money?
- where will it obtain the money?
Financial plan consists of three steps:
- forecast sales or revenue over some future time period
- use sales forecast to determine expected profits
- estimate how many additional assets company will need to support projected sales
gather, report and interpret financial information that describes status and operation of organization and aids in decision making
Accounting
Any company whose stock is publicly traded must report to who?
Securities and Exchanges Commission
These officials that use accounting to determine company’s tax liability
IRS and state tax officials
activities that provide funds
finance
activities that provide valuable assets
investing
activities that focus on selling goods and services
operating
accountant within a company; not affiliated with an accounting firm
management accountant
They have the authority to establish finance accounting and reporting standards for publicly held companies
Securities and Exchanges Commission
anything owed to creditors
liability
evidence of a company’s financial strength and stability
owners equity
The only financial statement considered to be PERMANENT
balance sheet
year-to-year financial statement
balance sheet
assets and liabilities are examined in this financial statement
balance sheet
financial statement used in controlling and planning activities
income statement
The ratio that covers the ability to meet short-term obligations; compares assets to liabilities
liquidity ratio
The ratio that meets short term debt payments on short notice
acid test ratio
The ratio that measures the effectiveness of management use of the company’s resources
activity ratio
tracks company’s cash inflows and outflows
cash budget
adopted by the International Accounting Standards Board (IABS)
International Financial Reporting Standards (IFRS)
covered in GAAP and IFRS
assets
low risk securities that either have short maturities or sold in secondary markets
marketable securities
oversee finances on govt orgs, public companies and private firms
financial managers
review financial data, make recommendations on cost and expense reduction
financial managers
arrange for debt financing and equity financing; invest funds
financial managers
advising services and data analysis (financing)
financial managers
yet to be collected credit sales and represent significant percentage of company’s assets
accounts receivable
two functions of accounts receivable (credit)
determine overall credit policy and which customers will be offered credit
managing working capital; makes sure too much cash isn’t tied up in operations
inventory control
currency can be exchanged for another country’s currency
exchange rate
creates offsetting ability to non-dollar denominated asset
balance sheet hedge
funds obtained through borrowing (_____ capital)
debt capital
funds provided by company’s owners when they invest earnings, issue stock to general public or raise capital from outside investors
equity capital
Type of company that obtains 50% of funds from lenders who purchase company bonds
Leverage company
Type of company that raises funds through sales of company stock
Equity company
Equity capital is more expensive than debt capital. True or False?
True
funds that consist of current liabilities
short-term funds
consists of long-term debt and equity
long-term funds
Long-term loans are used to finance inventory. True or False?
False. Short term loans like lines of credit and revolving credit agreements are used to finance inventory
a maximum amount someone can borrow over amount of time (short-term loan)
line of credit
guaranteed line of credit; funds will be available when needed (short-term loan)
revolving credit agreement
Where do organizations acquire long-term loans from?
commercial banks, bonds and equity financing
major sources of funds for corporations
bonds and stocks
investment companies that raise funds from rich people and wealthy institutions; funds used to make large investments in both public/private companies
private equity funds
Do companies prefer short term or long term funds?
Long term funds; short term loans pose more risks
An important determinant of a company’s dividend policy is its investment opportunities. True or False?
True
most common type of security sold privately
corporate debt security
govt owned invested company; investments like real estate
sovereign wealth fund
