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Intro to Business > Chapter 14 > Flashcards

Chapter 14 Flashcards

1
Q

Financial Information

A

central to every organization; essential for decision-making

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2
Q

Accounting

A

the process of collecting, recording classifying, summarizing, reporting, and analyzing financial activities

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3
Q

Internal Reports

A

used within the organization

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4
Q

Managerial Accounting (Internal)

A

provides financial information that managers inside the organization use to evaluate and make decisions about current or future operations

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5
Q

Sales Reports (Internal)

A

show how well marketing strategies are working as well as the # of units sold during a specific time period

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6
Q

Production Costs Reports (Internal)

A

can help departments track and control costs, as a well as zero in on the amount of labor needed

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7
Q

External Reports

A

used outside of the organization

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8
Q

Financial Accounting (External)

A

focuses on preparing external financial reports that are used by outsiders

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9
Q

Generally Accepted Accounting Principles (GAAP)

A

principles used by accountants to ensure accuracy and consistency in the way financial information reported

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10
Q

Financial Accounting Standards Board (FASB)

A

a private organization that is responsible for establishing financial accounting standards used in the US

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11
Q

IASB

A

International Accounting Standards Board

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12
Q

IFRS

A

International Financial Reporting Standards

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13
Q

MOU

A

Memorandum of Understanding

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14
Q

Annual Report

A

a yearly document that describes a firm’s financial status; includes balance sheet, income statement, and statement of cash flow

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15
Q

Public Accountant

A

independent accounts who serve organizations and individuals on a fee basis

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16
Q

Auditing

A

process of reviewing the records used to prepare financial statements

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17
Q

Auditor’s Opinion

A

indicates whether the statements have been prepared in accordance with accepted accounting rules; important to annual reports

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18
Q

CPA

A

Certified Public Accountants; the only ones allowed to issue an auditor’s opinion; must be certified through AICPA

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19
Q

Private Accountants

A

accountants employed to serve one particular organization

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20
Q

CMA

A

Certified Management Accountant; only need to pass an exam

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21
Q

Sarbanes-Oxley Act

A

2002, clarifies auditor-independence issues, places increased accountability on a company’s senior executives and management, strengthens disclosure of insider’s transactions, and prohibits loans to executives

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22
Q

Public Company Accounting Oversight Board (PCAOB)

A

independent 5-member board that has the authority to set and amend auditing, quality control, ethics, independence, and other standards for audit reports

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23
Q

Accountants

A

develop and manage financial systems and help plan the firm’s financial strategy

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24
Q

Assets

A

things of value owned by a firm; Liabilities + Owner’s Equity = Assets

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25
Q

Liabilities (debts)

A

are what a firm owes to its creditors

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26
Q

Owner’s Equity

A

total amount of investment in the firm minus liabilities; also called net worth; Assets - Liabilities = Owner’s Equity

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27
Q

Double-Entry Bookkeeping

A

every transaction must be recorded as 2 entries, to keep the accounting equation balanced

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28
Q

Accounting Cycle

A

the process of generating financial statements, beginning with a business transaction and ending with the preparation of the report; 6 steps

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29
Q

Data Analytics

A

the process of examining numerous data sets (big data) to draw conclusions about the information they contain, with the assistance of specialized systems and software

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30
Q

Balance Sheet

A

summarizes a firm’s financial position at a specific point in time

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31
Q

Liquidity

A

how fast they can be converted to cash

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32
Q

Current Assets (CA)

A

assets that can or will be converted into cash within the next 12 months

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33
Q

Marketable Securities (CA)

A

temporary investments of excess cash that can be converted to cash, readily

34
Q

Account Receivable (CA)

A

amounts owed to the firm by customers who bought goods/services on credit

35
Q

Notes Receivable (CA)

A

amounts owed by customers or others to whom the firm lent money

36
Q

Inventory

A

stock of goods being held for production or for sale to customers

37
Q

Fixed Assets

A

long-term assets used by the firm for more than 1 year

38
Q

Depreciation

A

the allocation of the asset’s original cost to the year in which it is expected to produce revenues

39
Q

Intangible Assets

A

long-term assets with no physical existance

40
Q

Patents & Copyrights

A

shield a firm from direct competition, so their benefits are more protective than productive

41
Q

Trademarks

A

registered names that can be sold or licensed to others

42
Q

Goodwill

A

when a company pays more for an acquired firm than the value of its tangible assets

43
Q

Current Liabilities (CL)

A

those due within a year of the date of the balance sheet

44
Q

Accounts Payable (CL)

A

amounts the firm owes for credit purchases due within a year and counterpart of account receivable

45
Q

Notes Payable (CL)

A

short-term loans from banks, suppliers, or others that must be repayed within a year

46
Q

Accrued Expenses (CL)

A

expenses, typically for wages/taxes, that have accumulated and must be paid at a specific future date within the year although the firm has not received a bill

47
Q

Income Taxes Payable (CL)

A

taxes owed for the current operating period but not yet paid, larger amounts are often shown separately

48
Q

Current Portion of Long-Term Debt (CL)

A

any replacement on long-term debt due within a year

49
Q

Long-Term Liabilities

A

come due more than 1 year after the due date of the balance sheet

50
Q

Retained Earnings

A

the amount left over from profitable operations since the firm’s beginning; total profits - all dividends paid to stockholders = retained earnings

51
Q

Income Statement

A

summarizes the firm’s revenue and expenses and shows its total profits or loss over a period of time

52
Q

Revenues

A

the dollar amount of sale plus any other income received from sources such as interest, dividends, and rent

53
Q

Gross Sales

A

the total amount of a company’s sals

54
Q

Sales Discounts

A

price reductions given to customer that pay their bills early

55
Q

Returns & Allowances

A

dollar amount of merchandise reformed by customers because they didn’t like the product or it was damaged or defective

56
Q

Net Sales

A

the amount left after deducting sales discounts and returns and allowances from gross sales

57
Q

Expenses

A

the costs of generating revenue; the following are recorded in the income statement: costs of goods sold & operating expenses

58
Q

Costs of Goods Sold

A

the total expense of buying or producing the firm’s goods or services

59
Q

Gross Profit

A

the amount a company earns after paying to produce/buy its products but before deducting operating expenses; net sales - costs of goods sold = gross profit

60
Q

Operating Expenses

A

the expenses of running a business that is not related directly to producing or buying its products

61
Q

Selling Expenses

A

related to marketing and distributing the company’s products

62
Q

General & Administrative Expenses

A

the business expenses that cannot be linked to either cost of goods sold or sales

63
Q

Net Profit/Net Income/Net Loss

A

final figure - bottom line - of an income statement; revenues>expenses = net profit; revenues<expenses = net loss

64
Q

Statement of Cash Flows

A

a summary of the money flowing into and out of a firm

65
Q

Ratio Analysis

A

involves calculating and interpreting financial ratios using data taken from the firm’s financial statements in order to assess its condition and performance

66
Q

Financial Ratio

A

states the relationship between financial data on a percentage basis

67
Q

Liquidity Ratio

A

measures the firm’s ability to pay its short term debts as they come due

68
Q

Current Ratio

A

the ratio of total current assets to total current liabilities; divide; a 2 is better

69
Q

Acid-Test (Quick) Ratio

A

like the current ratio but excludes inventory from the current asset; ratio of 1 is preferred

70
Q

Networking Capitol

A

used to measure a firm’s overall liquidity; total current assets - total current liabilities = networking capitol

71
Q

Profitability Ratios

A

measure how well the firm is using its resources to generate profit and how efficiently it is being managed

72
Q

Net Profit Margin (Return On Sales)

A

measures the percentage of each sales dollar remaining after all expenses, including taxes, have been deducted; net profit / net sales = net profit margin

73
Q

Return on Equity (ROE)

A

measures the return that owners receive on their investment in the firm; the major reason for investing in stocks; can be compared to past values to see how the company is performing over time; net profit / total owner’s equity = ROE

74
Q

Earnings Per Share (EPS)

A

measures the # of dollars earned by each share of stock; indicates a firm’s ability to pay dividends; net profit / # of shares of common stock outstanding

75
Q

Activity Ratios

A

measure how well a firm uses its assets; reflect the speed with which resources are converted to cash or sales

76
Q

Inventory Turnover Ratio

A

measures the speed with which inventory moves through the firm and is turned into sales; cost of goods sold / average inventory = inventory turnover ratio; average inventory = beginning inventory + ending inventory / 2

77
Q

Debt Ratios

A

measure the degree and the effect of the firm’s use of borrowed funds (debt) to finance its operations

78
Q

Debt-to-Equity Ratio

A

measures the relationship between the amount of debt financing (borrowing) and the amount of equity financing (owner’s funds); the lower the ratio, the better; total liabilities / owner’s equity = debt-to-equity ratio

79
Q

Cloud Based Accounting

A

firms add 5x more clients than traditional accounting firms

80
Q

Automation

A

in auditing services, will help generate complete sets of data and will improve the overall details of the auditing process

81
Q

Staffing

A

a change in approach to advisory services will have an impact on the type of experienced employees accountants hire in the future

Intro to Business (12 decks)

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