Chapter 1 - Basics Flashcards
Asssets
The cash, marketable securities, buildings, land, tools, equipment, vehicles, copyrights, patents, and any other items needed to run a business that a company holds.
Liabilities
Money a company owes to outsiders, such as loans, bonds, and unpaid bills.
Equity
Money invested in the company.
Sales
Products or services that customers purchase.
Costs and expenses
Money spent to operate a business, such as expenditures for production, compensation for employees, operation of buildings and factories, or supplies to run the offices.
Profit or loss
The amount of money a company earns or loses.
Cash flow
The amount of money that flows into and out of a business during the time period being reported.
Double-entry accounting
Process/system which requires a company to record resources and the assets it uses to get those resources.
Why do Executives and managers need financial reports?
To know how well the company is doing financially and to find out about problem areas so they can make changes to improve the company’s performance.
Why do employees need financial reports?
To know how well they’re meeting or exceeding their goals and where they need to improve. Also to make career and retirement-investment decisions based on the company’s financial reports.
Why do Creditors need financial reports?
To determine whether they should risk lending more money to the company and to find out whether the firm is meeting the minimum requirements of any loan programs that are already in place.
Why do Investors need financial reports?
To judge whether a company is a good investment.
Why Government agencies need financial reports?
These agencies need to be sure that companies comply with regulations set at the state and federal levels. They also need to be certain that companies accurately inform the public about their financial position.
Why do Analysts need financial reports?
To develop analytical reviews for clients who are considering the company for investments or additional loan funds.
Why do Financial reporters need financial reports?
To provide accurate coverage of a company’s operations to the general public, which helps make investors aware of the critical financial issues facing the company and any changes the company makes in its operations.
