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
No- par value stock definition
Capital stock that has not been assigned a value in the corporate charter
Notes payable definition
An obligation in the form of a written note
Outstanding stock definition
Capital stock that has been issued and is being held by stockholders
Paid in capital definition
The amount of stockholders paid in to the corporation in exchange for shares of ownership
Par value stock definition
Capital stock that has been assigned a value per share in the corporate charter
Payment date definition
The date the cash dividend payments are made to stockholders
Payout ratio definition
A measure of the percentage of earnings a company distributes in the form of cash dividends to common stockholders
Preferred stock definition
Capital stock that has contractual preferences over common stock in certain areas
Premium (on a bond) definition
The difference between the selling price and face value of a bond when a bond is sold for more than its face value
Privately held corporation definition
A corporation that has only a few stockholders and whose stock is not available for sale to the general public
Publicly held corporation definition
A corporation that may have thousands of stockholders and whose stock is traded on a national securities market
Record date definition
The date when the company determines ownership of outstanding shares for dividend purposes
Retained earnings definition
Net income that a company retains in its business
Return on common stockholders equity definition
A measure of profitability from the stockholder’s point of view
Net income - Preferred Dividends/ Average COMMON stockholders equity
Stated value definition
The amount per share assigned by the board of directors to no-par value stock
Treasury stock definition
A corporation’s own stock that has been reacquired by the corporation and is being held for future use
Annuity definition
A series of equal dollar amounts to be paid or received at evenly spaced time intervals
Compound interest definition
The interest computed on the principal and any interest earned that has not been paid or withdrawn
Discounting the future amount(s) definition
The process of determining present value
Future value of an annuity definition
The sum of all the payments (receipts) plus the accumulated compound interest on them
Future value of a single amount definition
The value at a future date of a given amount invested, assuming compound interest
Interest definition
Payment for the use of another person’s money
Present value definition
The value now of a given amount to be paid or received in the future, assuming compound interest
Present value of an annuity definition
The value now of a series of future receipts or payments, discounted assuming compound interest
Principal definition
The amount borrowed or invested
