Chapter 3 Terms Flashcards
Liquidity
Ability of a company to convert assets to cash to pay current obligations.
Long-term solvency
Assessment of whether a company will be able to pay long-term debts.
Short-term investments
Liquid investments not classified as cash equivalents. Temporary investments or short-term marketable securities.
Intangible assets
Assets used in the operations of business that have no physical substance.
Current maturities of long-term debt
Portion of long-term notes, loans, mortgages and bonds payable that are payable within the next year.
Subsequent event
Disclosure note when an event that has a material effect on a company’s financial position occurs after fiscal year end but before statements are issued or “available to be issued.”
Management Discussion & Analysis
Section that precedes financial statements and auditor’s report and provides views on significant events, trends and uncertainties pertaining to company’s operations, liquidity and capital resources.
Related-party transactions (right definition?)
When a company engages in transactions with owners, management, families of owners or management, affiliated companies and other parties that can significantly influence or be influenced by the company.
Proxy statement
Reported each year to shareholders and contains information on executive pay packages and any stock options or compensations and also commitments of company. Invites shareholders to annual meeting to elect board members and to vote on issues or vote by proxy.
Auditors’ report
Attest to fairness of financial statements based on their examination. Four basic types of opinions: unqualified, unqualified with explanatory paragraph, qualified, adverse or disclaimer.
Operational risk
Relates to how adept a company is at withstanding various events and circumstances that might impair its ability to earn profits.
Default risk
Risk that a company won’t be able to pay its obligations when they come due.
