Chapter 1 Flashcards
Liability
An obligation, debt or responsibility owed to someone.
Asset
Anything of value
Shareholder
One who owns shares of a stock.
Equity
Assets - Liabilities
Ownership, especially in terms of net monetary value, of a business.
Expected Return
Predicted return that an investor think he will earn based on a wide variety of factors.
Financing
A transaction that provides funds for a business.
Risk Aversion
Investor who prefers lower returns with known risks rather than higher returns with unknown risks.
Cost of Borrowing
The total charge for taking on a debt obligation that can involve interest payments and other financing fees.
Going Public
They decide to sell their company to the public instead of to private investor.
Working Capital Management
Is to ensure that a firm is able to continue its operations.
Capital
Money & Wealth to acquire goods & services.
Leverage
The use of borrowed funds with a contractually determined return to increase the ability of a business to invest and earn an expected higher return (usually at high risk).
A financial statement includes what 4 things
- Income Statement
- Cash Flow
- Balance Sheet
- Equity
Balance Sheet
Assets, Liabilities and Equity of a company at a point in time.
Cash Flow
All the money coming in and out of a business and separated into three categories.
- Operating
- Investing
- Financing
Short term viability of a company.
Income Statement
expenses and profits to show whether the company made or lost money. It also displays the revenues of a specific period, and the cost and expenses charged against these revenues. In contrast with the balance sheet, which represents a single moment in time, the income statement represents a period of time.
Financial Statement
Financial statements are used to find key info about the performance and disposition of a company.
Financial Analysis
Assessment of a company’s viability, stability, and profitability.
GAAP
Generally Accepted Accounting Principles
Audit
Verification of a financial statement to ensure its integrity and build confidence in those using it.
Limitations of the Financial Statement.
- Human Error and Manipulation
- Different accounting measures
- Focused solely on Financial Measures.
The TCA / FCA argues that it should have a triple bottom line for economic, social and enviorment laws benefits.
Revenue
Profit received before expenses are taken out.
Liquidity Ratios
Indicate how well a company can cover short term costs by converting money to cash.
