Chapter 1 Flashcards
3 Forms of a business organization
Sole proprietorship, partnership, corporation
Adv to sole prop.
Simple to establish, owner controlled, tax advantages
Adv to partnership
Simple to establish, shared control, tax adv
Adv of corporation
Easy to transfer, easy to raise funds, no personal liability
Internal users
Finance, marketing, management, human resources
External users
Investors, creditors
Solving ethical dilemmas
recognize, identify principal elements, identify alternatives, weigh impact of different stakeholders
3 types of business activity
Financing, investing and operating
2 primary sources of outside funds
Borrowing and issuing/selling shares
Revenue
Increase in assets or decrease in liabilities from the sale of goods or performance of service
Expense
Cost of assets consumed or services used
Liabilities arise from…
Expenses
hat are the 4 financial statements
Income, retained earnings, balance sheet, statement of cash flow
Income statements reports…
Specific time period, net income/net loss
Retained earnings statement shows…
Amounts and causes of changes in retained earnings during specific time period (same as income statement)
What can retained earning statements be used to evaluate
Dividend payment practices
Balance sheet reports…
Specific time POINT, assets, liabilities and stock holders equity
Assets =
Liabilities + stockholders equity
What does statement of cash flow tell us
Where did cash come from
How was cash used
What was the change in cash during balance period
Annual reports always include…
Financial statements, management discussion and analysis, notes to financial statements, auditors report
Management discussion and analysis
Presents managements view on the company’s ability to pay near-term obligations, its ability to fund operations and expansions, and its results of operations
