Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Intro To Business > Chapter 5 > Flashcards

Chapter 5 Flashcards

1
Q

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

A

Accounting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

accounting that focuses on preparing external financial reports that are used by outsiders such as lenders, suppliers, investors, and government agencies to assess the financial strength of a
business

A

Financial accounting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

accounting that provides financial information that managers can use to evaluate and make decisions about current and future operations

A

Managerial accounting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

the financial accounting standards followed by accountants in
the United States when preparing financial statements

A

GAAP
Generally accepted accounting principles

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

GAAP are set and enforced by

A

financial accounting standards board (FASB) and the securities exchange
commission (SEC)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

the concept that all transactions are recorded in the period in which they occur, instead of when the cash flow occurred

A

Accrual principle

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

the concept that accounting methods used by a company will be used consistently throughout the financial accounting process

A

Consistency pricipal

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

the concept that companies should record investments, assets, and liabilities at the original
purchase cost

A

Cost principal

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

the concept that the transactions of an organization will be separate from those of any other company or of the company’s ownership

A

Economic entity principles

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

accountants should disclose all details about business operations and financial recordings, including information that might not be flattering

A

Full disclosure principles

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Accounting equation

A

Assets = Liabilities + Owners’ Equity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

is a document that describes a firm’s financial status and usually discusses the firm’s activities during the past year and its prospects for the future

A

Annual report

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

An annual report includes:

A

a. Executive summary
b. Discussion and analysis
c. Future Goals
d. Management
e. Financials
It is a comprehensive summary of the firm’s financial health, its strategic vision, the extent to which it is/is not
meeting its goals, and what the plan is for the firm going forward

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

standard documents that summarize the financial health of a business

A

Financial statements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

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

A

balance sheet

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Assets that can or will be converted into cash within the next year

A

Current assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

long-term assets used for more than a year

A

Fixed assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

long-term assets with no physical existence

A

Intangible assets

19
Q

the speed with which an asset can be converted to cash

A

liquidity

20
Q

a financial statement that summarizes a firm’s revenues and expenses and shows its total profit or loss over a period of time

A

Income statement

21
Q

the total expense of buying or producing a firm’s good or service

A

cost of goods sold

22
Q

any expenses related to running the business not directly related to
producing or buying its products or services

A

operating expenses

23
Q

the amount a company earns after paying to produce or buy its products but before deducting operating expenses

A

Gross profit
Gross Profit = Net Sales - Costs of Goods Sold
Source of funds that cover all the firm’s other expenses

24
Q

the amount obtained by subtracting all of a firm’s expenses from its revenues, when the revenues are more than the expenses

A

Net profit/net loss
To calculate net profit/loss, subtract all expenses from all revenues

25
Q

a financial statement that provides a summary of the money flowing into and out of a firm during a certain period, typically one year

A

Statement of cash flow

26
Q

Statement of cash flow includes cash flow from these three activities

A
  • Cash flow from operating activities: related to production of goods and services
  • Cash flow from investment activities: related to purchase and sale of fixed assets
  • Cash flow from financing activities: related to debt and equity financing
27
Q

is the calculation and interpretation of financial ratios using data taken from the firm’s financial statements in order to assess its condition and performance

A

Ratio analysis-Comparing current numbers to previous numbers or numbers of other companies in the same industry

28
Q

ratios that measure a firm’s ability to pay its short-term debts as they come due

A

Liquidity ratios

29
Q

the ratio of total current assets to total current liabilities; used to measure a firm’s liquidity

A

Current ratio= Total Current Assets / Total Current Liabilities

30
Q

the ratio of total current assets excluding inventory to total current liabilities; used
to measure a firm’s liquidity

A

Acid test/ quick ratio
Quick Ratio = (Total Current Assets - Inventory) / Total Current Liabilities

31
Q

the amount obtained by subtracting total current liabilities from total current assets; used to measure a firm’s liquidity

A

Net Working Capital = Total Current Assets - Total Current Liabilities

32
Q

ratios that measure how well a firm is using resources to generate profit and how efficiently the firm is being managed

A

Profitability ratios

33
Q

the ratio of net profit to net sales

A

Net Profit Margin = (Net Profit / Net Sales) × 100

34
Q

the ratio of net profit to total owners’ equity

A

Net Profit / Total Owners’ Equity × 100

35
Q

the ratio of net profit to the number of shares of common stock outstanding

A

Earnings Per Share = (Net Income - Preferred Dividends) / Average Outstanding Common Shares

36
Q

ratios that measure how well a firm uses its assets

A

Activity ratios
Function: captures the speed with which resources are converted into cash or sales

37
Q

the ratio of goods sold to average inventory; it measures the speed with which inventory moves through the firm and is turned into sales

A

Inventory Turnover ratio = Cost of Goods Sold / Average Inventory

38
Q

ratios that measure the degree and effect of the firm’s use of borrowed funds to finance operations

A

debt ratio

39
Q

the ratio of total liabilities to owner’s equity; measures the relationship between the amount of debt financing and the amount of equity financing

A

Debt-to-Equity = Total Liabilities / Total Owners’ Equity

40
Q

The total amount of investment in a business after subtracting any liabilities

A

owners’ equity/net worth

41
Q

The total dollar amount of a company’s sales

A

gross sales

42
Q

The amount of a company’s sales left after deducting discounts, returns, and allowances from gross sales

A

net sales

43
Q

The cost of generating revenues

A

expenses

Intro To Business (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions