Ch 1 - 7 Flashcards
The goal of a corporation?
- To make a profit ( con: short cuts, risky moves, cheap quality) = can be vulnerable
- Increase share price (maximizing shoulder holder value) - definition long term
3.Long-term Statinablity
4.Growth
5.Building relationships (Stakeholder relationships)
Why is it maximizing value?
Increase share price
What is nonprofit value?
capital gotta expensive or no access to it, go under/ bankruptcy
How does corporate and social responsibility impact corporate decisions?
Due to them, Social wants to build trust and connection with the corporate decisions to increase financial success. While Corporate tries to bring loyalty to create an image to attract clients or opportunities.
Do investors
only care about earnings, or other considerations like treatment of stakeholders and
long-term viability?
Investors care more about the treatment of stakeholders and long-term viability due to wanting to make money and safety investments that be good financially.
What is the time value of money
money in the present is worth more than the same sum of money to be received in the future
What depreciation and interest expense are on the income statement
amount reflects a portion of the acquisition cost of the asset for production purposes.
What are current assets?
cash and other assets that are expected to be converted to cash within a year.
What are current liabilities
amounts due to be paid to creditors within twelve months.
What are the limitations of financial statements
fraudulent practice while recording information, dependency on historical costs, lack of comparability, and non-adjustability to inflation
What is Accrual accounting
records payments and receipts when services or good are provided or debt is incurred.
What is cash basis of accounting
cash receipts and disbursements
What is Receivable turnover
an accounting measure used to quantify how efficiently a company is in collecting receivables from its clients
What is the Profitability ratio; profit margin
Profit Margin = return on sales ratio or gross profit ratio
Profitability ratio = measures the amount of net income earned with each dollar
Fixed asset turnover
how well or efficiently a business uses fixed assets to generate sales.
Quick ratio
measures the ability of a company to use its near cash or quick assets
What is the Current ratio
measures a company’s ability to pay short-term obligations or those due within one year
Impact of current asset buildup (sales up vs sales down)
Sales affects the balance sheet because sales generate revenue and revenue increases the company’s assets
Definition of working capital management
the process through which a company plans for utilizing its current assets and liabilities in the best possible manner to ensure operational effectiveness
Permanent current assets
the minimum amount of current assets a company needs to continue operations
temporary current assets
variable current assets that move in line with seasonal fluctuations in sales.
Level production
each process step works in unison at a constant rate of production equal to the rate of customer demand or takt time.
Level production advantage
increases the chance you can respond to special requests from customers and fill large orders on time.
Level production disadvantage
lead to stockouts
Optimal financing of assets
capital structure that results in maximum value
What is Electronic Funds Transfer
transfer of money from one bank account to another, either within a single financial institution or across multiple institutions, via computer-based systems,
Benefits of ACH
- Gain more control over your daily cash flow.
- Streamline the disbursement process.
- Improve cash flow forecasting.
- Set up recurring payments.
- Eliminate mail float.
Benefits of checks
- No convenience fees. Many businesses charge convenience fees for electronic payments. …
- The safe way to send money. …
- Proof of payment. …
economic order quantity
the ideal quantity of units a company should purchase to meet demand while minimizing inventory costs such as holding costs, shortage costs, and order costs
Examples of carryings costs
warehouse storage fees, taxes, insurance, employee costs, and opportunity costs.
what is float
money within the banking system that is briefly counted twice due to time gaps in registering a deposit or withdrawal
