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acct > exam 3 > Flashcards

exam 3 Flashcards

1
Q

3 components of SE

A
  • capital
  • retained earning
  • common stock
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2
Q

paid-in capital (invested capital)

A

amount of money paid into a company by owner

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3
Q

Retained earning

A

revenue that has not been distributed

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4
Q

common stock

A

Shares of ownership in a corporation

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5
Q

corporation

A

business legally separated from its owner

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6
Q

article of incorporation

A

a. nature of the firms activities
b. shares of stock to be issued
c. initial board of directors

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7
Q

board of director

A

Establish corporates policies n appoint officers who manage corporate

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8
Q

organization chart

A

Trace the line of authority for a typical corporation

  1. stockholders (control the company)
  2. board of directors
  3. chief executive officer (CEO)
  4. executive vice president and digital & engineering | chief operating officers (COO) | chief financial officers (CFO) | legal counsel | executive vice president and sales & marketing
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9
Q

S corporation

A

…
- doesn’t pay double taxations

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10
Q

Equity Financing Stage 1

A

investment by founder of business

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11
Q

Equity Financing Stage 2

A

investment by family n friend

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12
Q

Equity Financing Stage 3

A

investment by “angel” investors & venture capital firms

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13
Q

angel investors

A

wealthy investors who is willing to risk investment funds on a promising business

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14
Q

venture capital firms

A

provide additional financing for a percentage ownership in the company

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15
Q

Equity Financing Stage 4

A

initial public offering

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16
Q

initial public offering

A

first time a corporation issues stock to the public
- most corp doesn’t go public until their equity financing exceed 20 mil

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17
Q

publicly held corporation

A

allow investment by the general public & is regulated by the SEC

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18
Q

privately held corporation

A

does not allow investment by general public and normally has fewer stockholder
- doesn’t need to file financial statement w SEC

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19
Q

stockholder rights

A
  1. right to vote
    - stockholder vote on matters (election of directors)
  2. right to receive dividends
    - stockholder shares profits
  3. rights to share in distribution of assets
    - shares distribution of asset if company is dissolved
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20
Q

limited liability
(corporation advantage)

A

owners are not personally responsible for company if it goes bankrupt

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21
Q

corporation advantage

A
  • easy to transfer ownership
  • easily attracts investment (raise capital)
  • limited liability
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22
Q

double taxation
(corporation disadvantage)

A

corporate is taxed at corporate level n again on dividends at individual level

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23
Q

corporation disadvantage

A
  • more paper work
  • double taxation
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24
Q

authorized stock

A

shares available to sell (issued + unissued)

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25
Q

issued stock

A

shares that has been sold
that is owned by the company or investors (outstanding + treasury)

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26
Q

outstanding stock

A

shares owned by investors

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27
Q

treasury stock

A

shared issued n repurchased by the company

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28
Q

par value

A

legal capital per share of stock that assigned when corporation is first established

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29
Q

no-par value stock

A

common stock that has not been assigned a par value

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30
Q

stated value

A

legal capital assigned per share to no-par stock

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31
Q

additional paid-in capital

A

portion of cash proceeds from issuing stock above par value

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32
Q

preferred stock

A

stock w preference over common stock in the patent of dividends n distribution of asset

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33
Q

convertible

(features of preferred stock)

A

shares can be converted into common stock

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34
Q

redeemable

(features of preferred stock)

A

shares can be returned to or redeemed by corporation at fixed price

35
Q

cumulative

(features of preferred stock)

A

shares received priority for future dividends, if dividends are not declared in a given year

36
Q

dividends in arrears

A

unpaid dividends on cumulative preferred stock

37
Q

treasury stock

A

name given to a company’s own issued stock that it has purchased

-reported in balance sheet
- countra account of SE

38
Q

accumulated deficit

A

negative balance in RE

39
Q

dividends

A

distribution to stockholders

40
Q

declared date

A

date on board of directors announced the next dividends to be paid
- create binding legal obligation for company declaring dividends
- ↑ dividend expense ↑ liability

41
Q

record date

A

date company looks at its records to determine who stockholder of company are

42
Q

payment date

A

date of distribution
- dividends are paid only on shares outstanding

43
Q

stock dividends

A

additional shares company stock given to stockholder

44
Q

stock split

A

large stock dividend that includes a reduction in par or stated value per share

45
Q

statement of stockholder equity

A

Summarize the change in SE OVERTIME

46
Q

stockholder equity

A

balance of each equity account at a POINT IN TIME

47
Q

statement of cash flow

A

summary of cash inflow n outflow during reporting period

  • inflow = cash received
  • outflow = cash paid
48
Q

net cash flow

A

cash inflow - outflow

49
Q

operating activities

A

transactions involving revenue n expense activities

50
Q

investing activities

A

transactions involving the purchase n sale of long-term asset and current investment

51
Q

capital expenditure (CAPEX)

A

investment in capital asset (replace/expand building, land, equipment)

52
Q

financing activities

A

transaction w lenders

53
Q

total net cash flow

A

beg bal of cash +/- net cash flow

54
Q

noncash activities

A

significant investing n financing activities that do not affect cash

55
Q

indirect method

A

begin w net income, then list adjustment to net income to find operating cash flow

56
Q

direct method

A

adjust items in income statement to directly show cash inflow n outflow from operation

  • must also report indirect method
57
Q

cash return on assets

A

measures operating cash flow generated per dollar of asset

58
Q

internal financing

A

profits generated by the company

59
Q

external financing

A

fund coming from outside of the company

(liability n SE)

60
Q

debt financing (liability)

A

borrowing money from creditors

61
Q

equity financing (SE)

A

obtaining investment from stockholders

62
Q

capital structure

A

mixture of liabilities n SE a business uses

63
Q

tax-deductible

A

interest expense incurred when borrowing money

64
Q

not tax-deductible

A

dividends paid to SE

65
Q

installment note

A

Loan requiring payment of interest and principle

66
Q

amortization schedule

A

provide table format detailing the cash payment each period

67
Q

carrying value

A

amount that a liability is reported in balance sheet

68
Q

lease

A

Contractual arrangement to the right to use an asset for specific period of time

69
Q

bond

A

formal debt instrument issued by a company to borrow money
- issuing company (borrower) receives cash by selling bond to investor (lender)

70
Q

principle or face amount

A

stated amount at specific maturity date

71
Q

stated interest rate

A

rate specific in the bond contact used to calculated the cash payment for interest

72
Q

private placement

A

sale of debt securities directly to a single investor

73
Q

secure bond

(bond characteristic)

A

supported by collateral

74
Q

unsecured bond

(bond characteristic)

A

not supported by collateral

75
Q

term bonds

(bond characteristic)

A

matures on a single date

76
Q

serial bonds

(bond characteristic)

A

matures in installment

77
Q

callable bond

(bond characteristic)

A

issuing company can pay off bonds early

78
Q

convertible bond

(bond characteristic)

A

invertor can convert bonds to common stock

79
Q

market interest rate

A

cheat sheet

80
Q

default risk

A

possibility that company will be unable to pay bond face amount n interest
- increase default risk (increase rate of return over life of bond by paying lower price @ issued date

81
Q

discount

A

bond issue price < face amount

  • carrying value n corresponding interest expense INCREASE over time
  • contra liability (deducted from bond payable)
82
Q

premium

A

bond issue price > face amount

  • carrying value n corresponding interest expense DECREASE over time
83
Q

early extinguishment of debt

A

issuing company retire debt before it scheduled maturity date

acct (3 decks)

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