Exam 3 Flashcards
A current liability is a debt that a company reasonably expects to be pay under what 2 conditions:
- From existing current assets or through the creation of other current liabilities
- Within one year or the operating cycle, whichever is longer.
Definition of liabilitites
“creditors’ claims on total assets” and as “existing debts and obligations.”
What is a significant feature of liabilities?
The future date on which they are due or payable (the maturity date)
A company that has more current liabilities than current assets often lacks _________.
liquidity, or short-term debt-paying ability.
Name 4 common types of current liabilties
- notes payable
- accounts payable
- unearned revenues
- accrued liabilities
—-such as taxes, salaries and wages, and interest
Accumulated Other Comprehensive Income Definition
An account that includes the cumulative amount of all previous items reported as other comprehensive income
Authorized Stock Definition
The amount of stock that a corporation is authorized to sell as indicated in its charter
Bond Certificate Definition
A legal document that indicates
1. the name of the issuer
2. the face value of the bonds
3. Other data such as the contractual interest rate
4. the maturity date of the bonds
Bonds definition
A form of interest-bearing notes payable issued by corporations, universities, and governmental agencies
Cash Dividend Definition
A pro-rata (proportional to ownership) distribution of cash to stockholders
Charter definition
A document that describes
1. corporation’s name and purpose,
2. types of stock and numbers of shares authorized
3. names of individuals involved in the formation
4. numbers of shares each individual has agreed to purcase
Contractual (stated) interest rate definition
Rate used to determine the amount of interest that the issuer pays and the investor receives
Corporation definition
A company organized as a separate legal entity, with most of the rights and privileges of a person
Cumulative Dividend Definition
A feature of preferred stock entitling the stockholder to receive current and unpaid prior-year dividends before common stockholders receive any dividends
Current Liability Definition
A debt that a company reasonably expects to pay
1. from existing current assets or through the creation of other current liabilities
AND
2. within one year or the operating cycle, whichever is longer
Declaration date definition
The date the board of directors formally authorizes the dividend and announces it to stockholders
Discount (on a bond) definition
The difference between the face value of a bond and its selling price when a bond is sold for less than its face value
Dividend definition
A distribution by a corporation to its stockholders on a pro-rata (proportional to ownership) basis
Dividends in arrears definition
Preferred dividends that were supposed to be declared by were not declared during a given period
Face value definition
Amount of principal due at the maturity date of the bond
Legal capital definition
The amount of capital that must be retained in the business for the protection of corporate creditors
Long-term liabilities definition
Obligations that a company expects to pay more than one year in the future
Market interest rate definition
The rate investors demand for loaning funds to the corporation
Maturity date definition
The date on which the final payment on a bond is due from the bond issuer to the investor
