Chapter 1

Question 1

Liability

Answer 1

An obligation, debt or responsibility owed to someone.

Question 2

Asset

Answer 2

Anything of value

Question 3

Shareholder

Answer 3

One who owns shares of a stock.

Question 4

Equity

Assets - Liabilities

Answer 4

Ownership, especially in terms of net monetary value, of a business.

Question 5

Expected Return

Answer 5

Predicted return that an investor think he will earn based on a wide variety of factors.

Question 6

Financing

Answer 6

A transaction that provides funds for a business.

Question 7

Risk Aversion

Answer 7

Investor who prefers lower returns with known risks rather than higher returns with unknown risks.

Question 8

Cost of Borrowing

Answer 8

The total charge for taking on a debt obligation that can involve interest payments and other financing fees.

Question 9

Going Public

Answer 9

They decide to sell their company to the public instead of to private investor.

Question 10

Working Capital Management

Answer 10

Is to ensure that a firm is able to continue its operations.

Question 11

Capital

Answer 11

Money & Wealth to acquire goods & services.

Question 12

Leverage

Answer 12

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).

Question 13

A financial statement includes what 4 things

Answer 13

1. Income Statement
2. Cash Flow
3. Balance Sheet
4. Equity

Question 14

Balance Sheet

Answer 14

Assets, Liabilities and Equity of a company at a point in time.

Question 15

Cash Flow

Answer 15

All the money coming in and out of a business and separated into three categories.

1. Operating
2. Investing
3. Financing

Short term viability of a company.

Question 16

Income Statement

Answer 16

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.

Question 17

Financial Statement

Answer 17

Financial statements are used to find key info about the performance and disposition of a company.

Question 18

Financial Analysis

Answer 18

Assessment of a company’s viability, stability, and profitability.

Question 19

GAAP

Answer 19

Generally Accepted Accounting Principles

Question 20

Audit

Answer 20

Verification of a financial statement to ensure its integrity and build confidence in those using it.

Question 21

Limitations of the Financial Statement.

Answer 21

1. Human Error and Manipulation
2. Different accounting measures
3. Focused solely on Financial Measures.

The TCA / FCA argues that it should have a triple bottom line for economic, social and enviorment laws benefits.

Question 22

Revenue

Answer 22

Profit received before expenses are taken out.

Question 23

Liquidity Ratios

Answer 23

Indicate how well a company can cover short term costs by converting money to cash.