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SOM 122 > Final VITs > Flashcards

Final VITs Flashcards

1
Q

Accounting equation

A

Assets = Liabilities + Owners Equity

Used by accountants to balance data for the firms financial transactions at various points in the year

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2
Q

Accounts payable

A

Current liabilities consisting of bills owed to suppliers, plus wages and taxes due within the coming year

Current liabilities a firm owes for merchandise or services purchased on credit

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3
Q

Activity ratio

A

Financial ratio for evaluating managements efficiency in using a firm’s asset

Fixed assets turnover = revenue / fixed assets

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4
Q

Asset

A

Any economic resource expected to benefit a firm or an individual who owns it

Economic resources owners by a firm, items can be tangible or intangible

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5
Q

Balance sheet

A

Financial statement that supplies detailed financial information about a firm’s assets, liabilities, and owners equity

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6
Q

Costs of revenues

A

the total cost of manufacturing and delivering a product or service.

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7
Q

Current liability

A

Debt that must be paid within one year

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8
Q

Current assets

A

Asset that can or will be converted into cash within a year

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9
Q

Depreciation

A

Accounting method for distributing the cost of an asset over its useful life

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10
Q

Fixed asset

A

Asset with long-term use or value, such as land, buildings, and equipment

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11
Q

Goodwill

A

Goodwill is created when one company acquires another for a price higher than the fair market value of its assets; for example, if Company A buys Company B for more than the fair value of Company B’s assets and debts, the amount left over is listed on Company A’s balance sheet as goodwill.

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12
Q

Intangible asset

A

Nonphysical asset, such as a patent or trademark, that has economic value in the form of expected benefit

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13
Q

Income taxes

A

Tax levied by the government directly on income, especially an annual tax on personal income

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14
Q

Liability

A

Debt owed by a firm to an outside organization or individual

What the business owes to others - its debts

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15
Q

Liquidity

A

Ease with which an asset can be converted into cash

Current ratio = current assets / current liabilities

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16
Q

Long-term liability

A

Debt that is not due for at least one year

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17
Q

Net income / profit / earnings

A

Gross profit minus operating expenses and income taxes

The revenue left over after costs and expenses

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18
Q

Operating expenses

A

Costs, other than the cost of revenues incurred in producing a good or service

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19
Q

Operating income

A

Gross profit minus operating expenses

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20
Q

Owners equity

A

Amount of money that owners would receive if they sold all of a firm’s assets and paid all of its liabilities

The amount of the business that belongs to the owners minus any liabilities of the owners

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21
Q

Paid-in capital

A

Money that is invested in a company by its owners

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22
Q

Profitability ratio

A

Financial ratio for measuring a firm’s potential earnings

Return on sales = net income after taxes / net sale

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23
Q

Retained earnings

A

Earnings retained by a firm for its use rather than paid out as dividends

Accumulated earning from the firm’s profitable operations that are reinvested in the business

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24
Q

Revenues

A

Funds that flow into a business from the salve of goods or services

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25
Q

Solvency ratio

A

Financial ratio, either short or long term, for estimating the borrowers ability to repay debt

Short term - liquidity
Long term - solvency

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26
Q

Statement of cash flows

A

Financial statement describing a firm’s yearly cash receipts and cash payments

Related to the three major activities of a firm:

  1. Operations
  2. Investments
  3. Financing
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27
Q

Gross profit

A

Preliminary, quick - to - calculate profit figure calculated from the firm’s revenues minus its cost of revenues (the direct costs of getting the revenues)

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28
Q

Income statement / profit & loss statement

A

Financial statement listing a firm’s annual revenues and expenses that s bottom line shows annual profit or loss

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29
Q

Bear market

A

Period of falling stock prices marked by negative investor sentiments with motivation to sell ahead of anticipated losses

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30
Q

Bull market

A

Period or rising stock prices, lasting 12 months or longer, featuring investor confidence for future gains and motivation to buy

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31
Q

Compound growth

A

Compounding of interest over time - with each additional time period, interest returns accumulating and earn more interest

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32
Q

Dividend

A

Payments to shareholders, on a per-share basis, out of the company’s earnings

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33
Q

Dow Jones Industrial Average (DJIA)

A

Oldest and most widely cited market index based on the prices of 30 blue chip, large-cap industrial firms on the New York stock exchange

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34
Q

Investment bank

A

Financial institution that specializes in issuing and reselling new securities

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35
Q

Market index

A

Statistical indicator designed to ensure the performance of a large group of stocks or track the price changes of a stock market

36
Q

NASDAQ composite index

A

Market index that includes all NASDAQ listed companies, both domestic and foreign, with a high proportion of technology companies and small - cap stocks

37
Q

Securities markets

A

Markets in which stocks and bonds are sold

38
Q

Primary securities market

A

Market in which new stocks and bond are bought and sold by firms and governments

39
Q

Secondary securities market

A

Market in which existing stocks and bonds are sold to the public

40
Q

Securities and exchange commission (SEC)

A

Government agency that regulates US securities markets

41
Q

Stock quotation

A

The price of stock as quoted on an exchange

42
Q

Time value of money

A

Principle that inverted money grows, over time, by earning interest or some other form of return

Money received sooner is more valuable than money received later

43
Q

Common stock

A

Most basic form of ownership, including voting rights on major issues, in a company

44
Q

Preferred stock

A

Stock that entitles the holder to a fixed dividend, whose payment takes priority over that of common stock dividends

45
Q

Blue-chip stock

A

Common stock issues by a well established and respected company with a sound financial history and a stable pattern of dividend payouts

46
Q

Income stock

A

Equity security that pays regular, often steadily increasing dividends

47
Q

Growth stock

A

A company stock that tends to increase in capital value rather than yield high income

48
Q

Book value

A

Value of a common stock expressed as the firm’s owners equity divided by the number of common shares

The difference between the assets and liabilities, on a per share basis

49
Q

Market value

A

Current price of a share of stock in the stock market

50
Q

Price earnings ratio (P/E ratio)

A

The comparison of a firm’s current share price of its current earnings per share

The market value per share divided by the earnings per stare

51
Q

S&P 500

A

Market index of US equities based on the performance of 500 large-cap stocks representing various sectors of the overall equities market

52
Q

Chief financial officer

A

A senior executive with responsibility for the financial affairs of a corporation or other institution

53
Q

Treasurer

A

A person appointed to administer or mange the financial assets and liabilities of a society, company, local authority, or other body

54
Q

Controller

A

A person who manages all of a firm’s accounting activities

55
Q

Commercial bank

A

Company that accepts deposits that it uses to make loans, earn profits, pay interest to depositors, and pay dividends to owners

56
Q

Investment bank

A

Financial institution that specializes in issuing a reselling new securities

57
Q

Hedge fund

A

A limited partnership of investors that used high risk methods, such as investing with borrowed money, in hopes of realizing large capital gains

58
Q

Financial management

A
  1. Balancing short-term and long-term demands
  2. Balancing potential risks and potential rewards
  3. Balancing leverage and flexibility
59
Q

Financial planning

A

Process of looking at ones current financial condition, identifying ones goals, and anticipating requirement for meeting those goals

60
Q

Financial plan

A

A comprehensive evaluation of an investors current and future financial state by using currently known variables to predict future cash flows, asset values and withdrawal plans

61
Q

Internal sources of funds

A

Finance from inside the business

62
Q

External sources of funds

A

Finance from outside the business

63
Q

Start-up budget

A

An itemized list of income and expenses for a new business, which often covers the period up to commencing operations and perhaps a small amount of time after operations have commenced

64
Q

Operating expenses

A

Costs, other than the cost of revenues, incurred in producing a good or service

65
Q

Capital

A

Funds needed to create a operate a business enterprise

66
Q

Accounts receivable

A

Money owed to a company by its debtors

67
Q

Currency (cash)

A

Government-issued paper money and metal coins

68
Q

Inventory

A

A complete list of items such as property, goods in stock, or the contents of a building

69
Q

Debt

A

Company’s total liabilities

70
Q

Equity

A

The value of the shares issued by a company

71
Q

Ratio analysis

A

The assessment of a firm’s financial condition using calculations and financial ratios developed from the firms financial statements

72
Q

Leverage ratios

A

Measure the degree to which a firm relies on borrowed funds in its operations

Debt to owners equity ratio = total liabilities / owners equity

73
Q

Finance

A

The study of how money is managed and the actual process of acquiring needed funds

74
Q

Investment banks

A

Advise companies in major financial transactions, such as buying and selling companies or divisions, and raising new capital by issuing stock or bonds

75
Q

Brokerage firms

A

Bring buyers and sellers together in order to facilitate transactions, often providing advice to their clients

76
Q

Bulge bracket banks

A

The worlds largest and most profitable multi-national investment banks who clients are usually large corporations, institutions, and governments

77
Q

Mutual insurance company

A

Owned entirely by its policyholders; any profits earned are revered to policyholders in the form of dividend distributions or reduced future premiums

78
Q

Stock insurance company

A

Owned by investors who have purchased company stock; any profits generated are distributed to the investors without necessarily benefiting the policyholders

79
Q

Compound growth

A

Compounding of interest over time - with each additional time period, interest returns accumulate

80
Q

Rule of 72

A

The approximate the number of years needed to double your money by dividing the annual interest rate (in percent) into 72

81
Q

Income stock

A

Stocks purchased primarily for dividend payouts rather than capital gains potential; companies tend to be older, stable firms with fairly predictable profits but lower prospects for growth

82
Q

Cyclical stock

A

Stocks from companies whose earnings tend to track the ups and downs of the economy in a predictable pattern - their revenue and profits grow as the economy grows and shrink as the economy shrinks; many of these companies are in basic industries like housing a transportation

83
Q

Defensive / counter-cyclical stock

A

Stocks of companies that tend to fare better when the economy is doing worse and vise versa; for example, new dad sales decline in a falling economy buy car repair businesses usually increase revenue as people try to hang onto their cars for longer

84
Q

Large cap, mid cap, small cap stock

A

General designations for the size of a company’s market capitalization (the market value of its stock multiplied by the number of shares in circulation); small caps tend to be higher-risk, higher-reward caps than larger caps, with mid caps somewhere in between - but these are averages over time, not predictable for specific stocks

85
Q

Penny stock

A

Stocks that sell for less than on dollar per share or, more generally stocks that are highly speculative (risky, but with upside potential) tend to be from newer companies or established companies whose stock has plummeted for some reason

SOM 122 (2 decks)

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