Exam 4 Flashcards
Accounting
The recording measurement and interpretation of financial information
Certified Public Accountant
Individual who has been certified to provide accounting services ranging from the preparation of financial records and the filing of tax returns to complex audits of corporate financial records
Private Accountants
Accountants employed by large corporations government agencies and other organizations to prepare and analyze their financial statements
Certified Management Accountants
Private Accountants who after examination are certified by the IMA
Managerial Accounting
Internal use of accounting statements by managers in planning and directing the organizations activities
Cash Flow
The movement of money through an organization
Budget
Inter financial plan that forecasts expenses and income over a set period of time
Annual Report
Asummary of the firms financial information
Assets
things that the company has
Liabilities
Debts that the firm owes
Owner Equity
All of the money that has been put into the company that needs to be paid back
Accounting Equation
Assets=Liabilities+Owners Equity
double Entry Bookkeeping
System of recording transactions in separate accounts in order to maintain the balance of the accounting equation
The Accounting Cycle
- Examining source documents
- Recording transactions in accounting journal
- Posting recorded transactions to ledger
- Preparing financial statements
Journal
Time ordered list of transactions
Ledger
A book or computer program with separate files for each account
Income Statement
A financial Report that shows an organizations profitability over a period of time
Revenue
the total amount of money received from the sale of goods or services
Cost of Goods sold
The amount of money spend to buy an produce a product
Gross income (Profit)
Revenue minus the cost of goods sold required to generate revenue
Expenses
The costs incurred to operate daily
Depreciation
The process of spreading a cost over a long period of time
Net Income
Total profit after all expenses
Balance Sheet
Represents a snapshot of the companies financial position
Current Asset
Assets that are converted into cash within the course of the same calendar year
Accounts Recievable
money owed the company bu its clients of customers who have promised to pay for the products at a later date
Current liabilities
Firms financial obligation to short term costs
Accounts Payable
Money owed to suppliers that was purchased with credit
Accrued Expenses
Account representing all unpaid financial obligations incurred by the firm
Statement of cash flows
explains how the company’s cash changes from the beginning of the accounting period to the end
Ratio Analysis
Calculations that measure an organizations financial health
Profitability ratios
Measure how much operating income or net income an organization is able to generate relative to its assets, owners equity an sales
Profit margin
shows the over percentage of profits earned by the company
Return on Equity/investments
Shows how much income is generated by each dollar
Asset Utilization Ratios
measure how well a firm uses its assets
Recievable turnover
Sales divided by accounts receivable
Inventory turnover
Indicates how many times a firm sells inventory and replaces it
Total Asset turnover
Measures how well an organization uses all of its assets in creating sales
Liquidity ratios
Comarpes short term assets to current liabilities to indicate the speed with which a company turn assets into cash
Current ratio
dividing current assets by current liabilities
Quick Ratio
a stringent measure of liquidity that eliminates inventory.
Earnings per share
net income or profit divided by the number of stock shares outstanding; measures the value of earnings per outstanding share.
Dividends per share
money paid to the stockholders by the corporation
Money
Anything generally accepted in exchange for goods and services
Checking Account
Money stored in a bank or other financial institution that can be withdrawn
Savings Account
An account with funds that cannot be withdrawn without advance notice and have limits on the withdraws
Money Market Account
Slightly higher interest rates, but the owner can only write a certain number of checks of deposits
CD (Certificate of Deposit)
Offer a set interest rate if the money is kept in the bank
Credit Cards
Cards that allow one to pay something at a later Date
Rewards Cards
Credit cArds that Carry a benefit to the user
Debit Card
Looks like a credit Card, but functions as a check
Federal Reserve Board (fed)
An independent Agency of the Government to regulate the nations banking, and financial industry
Monetary policy
The means by which the FED controls to the amount of money available in the economy
Open Market Operations
the process where a central bank, like the Federal Reserve in the United States, buys or sells securities in the open market to influence the money supply and credit conditions
Reserve Requirement
The percentage of deposits that banking institutions must hold in reserve
The discount Rate
The rate of interest that Fed chrages to loan money to any banking institution
Credit Controls
The authority to establish and enforce credit rules for financial institutions and some private investors
Commercial Banks
financial institutions that accept deposits and offer loans to individuals and businesses. This is the oldest of all banking institutions
Savings and Loan Associations
“thrifts” financial institutions that primarily offer savings accounts and make long-term loans for residential mortgages
Credit Unions
A financial institution owned and controlled by its depositors who usually have a common employer, profession, trade, group, or religion
Mutual Savings Banks
a financial institution chartered by a central or regional government, without capital stock, owned by its members who subscribe to a common fund
Federal Deposit Insurance Corporation (FDIC)
An insurance fund established in 1933 that insures individual bank accounts
National Credit Union Administration (NCUA)
Regulates and charters credit unions and insures their deposits
Insurance Companies
Businesses that protect their clients against financial losses from specific events
Pension Funds
Managed investment pools set aside by individuals to provide retirement for members
Mutual Fund
Polls investor dollars and invests them in large numbers of well-diversified securities
Exchange Traded Funds (ETF)
a basket of securities, such as stocks, bonds, commodities, or currencies, that can be bought and sold throughout the trading day.
Brokerage Firms
Buy and sell stocks, bonds, and other securities for their customers and provide financial services
Investment Banker
helps businesses and people raise capital by issuing stocks or borrowing money
Finance Companies
Businesses that offer short-term loans at substantially higher rates of interest than banks
Electronic Funds Transfer
Any movement of funds by means of an electronic terminal
Automated Teller Machine
ATM
Automated Clearinghouse (ACH)
a network that facilitates electronic funds transfers between financial institutions, primarily for payments and money transfers
Working Capital Management
Managing short term assets and liabilities
Transaction Balances
Cash Kept on hand by a firm to pay normal daily expenses
LockBox
An address for receiving payments
Marketable securities
Temporary investments of extra cash by organizations for up to one year in the US
Treasury bills
Short term debt obligations the US Gov. Sells to raise money
Commercial Certificates of Deposit
CD’s issued by commercial banks available in minimum amounts of 100,000 that may be traded prior to maturity
Commercial Paper
a written promise from one company to another to pay a specific amount of money that will be paid at one time
Eurodollar Market
a market for US collars held in foreign countries
Trade Credit
Credit extended by suppliers for the purchase of their goods and services
Line of Credit
An arrangement by which a bank agrees to lend a specific amount of money to the organization upon request
Secured Loans
Loans backed by collateral that the bank can claim is not paid back
Unsecured Loans
Loans only backed by the borrowers good reputations
Prime Rate
The interest rate commercial banks charge their best customers for short term loans
Factor
encompassing the purchasing of accounts receivable (invoices) from a seller by a factor, who then advances cash to the seller and takes on the responsibility of collecting the debt
Long term (Fixed) Assets
Assets that are expected to last for many years
Capital budgeting
the process a company uses to evaluate and select long-term investments, like purchasing new equipment or building a new facility, that can significantly impact the company’s future cash
Long-term Liabilities
Debts that will be repaid over a number of years
Bonds
a debt security that represents a borrower’s promise to repay a principal amount at a specified date and to pay interest
Unsecured Bonds
Bonds not backed by collateral
Secured Bonds
Bonds backed up by specific Collateral
Serial bonds
A type of bond where the principal repayment is made in installments over a series of years, rather than all at once
Floating Rate bonds
bonds with interest rates that change with current interest rates otherwise available in the economy
Junk bonds
A special type of high interest bonds that carry higher risks
Retained Earnings
earnings after expenses that are reinvested in the assets of the firm and being to the owners in form of equity
Dividend Yield
the dividend per share divided by the stock price
Payout Ratio
The percentage of earnings paid to the stockholders in dividends
Primary Market
The market where firms raise financial capital
Secondary Markets
Stock exchanges and over the counter markets where investors can trade their securities with other investors
Investment Banking
The sale of stocks and bonds for corporations
Securities Market
the mechanism for buying and selling securities
Over the Counter Market (OTC)
done directly between two parties, without the supervision of an exchange
