Business Related Concepts and Terms Flashcards
mutuality of agreement
the parties must agree willingly. Often stated as a meeting of the minds.
holographic will
an entirely handwritten will
partnership
a contract between two or more persons to pool resources and efforts for the purposes of conducting a business operation
audit opinion
a report given by an independent certified public accountant that gives the auditor’s opinion as to the reasonableness of the facility’s financial statement
oral contract
an enforceable agreement that is not in writing or signed by the parties
rate of return
the annual percentage of income earned on an investment
corporation
an association of shareholder(s) (even one shareholder) created by statute and treated by the law as a person.
cash flow
the cash receipts less the cash disbursements from a given operation or set of operations for a specific time period
competence
the capability of a person to make a will. A person is judged capable or competent if he/she understands the nature and extent of his/her property, the identity of the property owned, and the consequences of the act of making a will.
bonds
a debt obligation of a facility or corporation or other body to pay a specific amount on a stated date
off-balance sheet
an item reported in financial statements that nevertheless has an impact on the operations of a facility.
attachment
a legal procedure in which a defendant’s property is seized by court order pending the outcome of a claim against the defendant
contractor
one who agrees to do work for another and retains control over the means, method and manner in which the work is done
consideration
something of value given in return for performance of an act or the promise to perform an act
contract
an agreement between two or more persons that creates legally enforceable rights and remedies
good faith
means being truthful and faithful to one’s obligations in business dealings
incompetence
inability to function within the limits judged normal by a court of law. A guardian must be appointed if a person is found to be incompetent.
better-off test
a method of evaluating the strategic impact of an acquisition or business venture on the facility’s financial standing
mortgage
a use of the value of a purchase to borrow money for the purchase of that property by promising to repay the debt on a scheduled basis
Will
a person’s declaration as to how he/she wishes his/her real and personal property to be disposed of after death
audit
an examination of a facility’s compliance with accounting standards and policies
living will
some nursing facility residents make a living will, which governs the type(s) of treatment to be given the resident in the event the resident becomes comatose or in a similar condition
401(k)
an employee retirement plan, sometimes called a salary reduction plan
present value
the current value of a future payment or stream of payments
liquidity
the ability of current assets to meet the financial obligations of current liabilities
letter of credit
a bank instrument stating that a bank has granted the holder the amount of credit equal to the face amount of the letter of credit (L/C)
arm’s length transaction
a business transaction at market-established prices between two unrelated parties
allowance for bad debts
a provision a facility makes for uncollectible accounts receivable
Return on Owner’s Equity (ROE)
measures the return that a facility has earned on the funds invested in it
deferred expense
an expense incurred in one accounting period that will benefit future accounting periods, also called a deferred charge. Insurance pre-paid, as mentioned above, is a good example.
Return of Invested Capital (ROIC)
(net income after any taxes) / (noncurrent liabilities + owner’s equity)
certified public accountant (CPA)
a title given to accountants who pass the Uniform CPA examination administered by the American Institute of Certified Public Accountants and who satisfy the experience requirements of each given state
limited liability company - or - limited liability corporation
llc’s provide the flexibility of a partnership with the same kind of financial protection offered by a C corporation structure.
cost of capital
the rate of return available in the marketplace on investments that are comparable both in terms of risk and other characteristics such as liquidity and other qualitative factors
grandfather clause
provision whereby persons already engaged in a business or profession receive a license or entitlement without meeting all the conditions new entrants would have to meet
intangible asset
an item or right that has no physical substance and provides an economic benefit
administrator
a person appointed to transfer the property of one who dies intestate to those who succeed in ownership. To die intestate is to die without leaving a will. The estate (or property) of persons who die testate (with a will) is administered by an executor of the estate, usually named in the will.
defined benefit pension plan
a program of pension benefits that employees will receive when they retire
long term asset
an asset with future economic benefits that are expected for a number of years
return on investment (ROI)
a measure of the earning power of a facility’s assets
price elasticity of demand
the effect price change has on income. This is calculated by
cost-benefit analysis
a method of determining whether the results of a particular proposed course of action are sufficient to justify the cost of undertaking it
return on assets
is calculated by dividing the net income after any taxes by the average total assets
mutuality of obligation
all parties must be bound to some reciprocal performance. A promise by one person to do something at the will of another person without any consideration (benefit) to the first person not a contract.
bankruptcy
inability to pay one’s debts, insolvency
annual report
a detailed statement of the facility’s financial position at the end of its reporting year - either fiscal or calendar
bad faith
generally implies a design to mislead or deceive another
defined contribution pension plan
a program designating the annual dollar amount an employer contributes to a pension plan
externality
any incidental by product(s) (both positive and negative) associated with a particular course of action chosen by a facility
note receivable
a contract to receive money at a future date
net present value
in corporate finance, the present value (i.e., the value of cash to be received in the future expressed in current dollars) of an investment in excess of the initial amount invested
profit margin
the ratio of income to sales (gross profit) / (sales)
commercial paper
short-term securities (2 days to 270 days) issued by corporations, banks, and other borrowing institutions to raise short term working capital
garnishment
a legal process through which a plaintiff can obtain goods or money belonging to a defendant, held by a third party, that are due or will become due to the plaintiff. Garnishment is similar to attachment.
Generally Accepted Accounting Principles (GAAP)
the policies, standards and rules followed by accountants in the preparation of financial statements and in recording and summarizing transactions
net profit margin
(also known as return on services rendered) shows the percentage of net income generated by each service billed dollar in for-profit facilities.
competent parties
in the case of some nursing home residents, the courts decide on their competence to enter into a contract
leverage
in accounting and finance, the amount of long-term debt that a company has in relation to its equity
