Definitions yo Flashcards
omission or mistreatment of information that could influence the decisions that financial statement users make about a specific reporting entity
materiality
when the financial information actually depicts the underlying economic event
faithful representation
world wide accounting standards
IFRS
international financial reporting standards
makes sure reports are relevant to investors
GAAP
generally accepted accounting principles
group of citizens who do not work for the government that makes GAAP
FASB
Financial accounting standards board
provides accountability by issuing fees
SOX
Sarbans Oxley
income
revenue
the cost required for something
expence
profit
net income
profit over a period of time
income statement
what is the income statement equation?
revenue-expenses=net income
value at a point in time
balance sheet
what is the balance sheet equation?
assets=liabilities+owner’s equity
future economic benefits obtained or controlled by an entity as a result of past transactions
asset
expected to convert to cash within one year
current asset
probable future sacrifice of economic benefits arising from an entity’s present obligations to transfer assets or provide service to other entities in the future as a result of past transactions
liability
debt that is expected to be satisfied within one year
current liability
the residual interest on an entity’s assets that remains after deducting its liabilities
stockholders equity
government body who has control over companies who sell stock
SEC
security exchange commission
profit/# of shares
EPS
earnings per share
presents each item as a percentage of total assets for one year
common sized balance sheet
presents each item as a percentage of sales for one year
common sized income statement
how easily an asset can be turned into cash
liquidity
refers to the ability to generate cash, internally or externally, to satisfy plant capacity needs
solvency
arises when one party to a business relationship can take actions for his or her own benefit that can harm other parties in the relationship
conflict of interest
deals with the conflict of interest between shareholders and debt holders
debt covenant
used when property rights in the asset have not been transferred to the lessee
operating lease
give an example of an operating lease
short term rental
used when property rights in the asset have been transferred to the lessee
capital lease
stock that is bought back by the issuing company, reducing the amount of outstanding stock on the open market
treasury stock
gives the holder the right, but not the obligation, to buy company stock at a stated price
stock option
stocks who’s holder receive dividend payments first
preferred stock
Give an example of a capital lease
when the lease spans most of the assets life
