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ADMS 2500 > Module 11 > Flashcards

Module 11 Flashcards

1
Q

How do firms generate capital internally?

A

Operations

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2
Q

How do firms generate capital externally?

A

Borrow and New Owners

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3
Q

Whats #1 role of business?

A

To survive

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4
Q

What are some obligations of liability?

A

We sacrifice resources in future and agree to it now

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5
Q

What is current liability?

A

One operating cycle or less than a year

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6
Q

What is the Current Ratio?

A

Current Assets / Current Liabilities

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7
Q

What are some examples of Current Liabilities?

A

A/P , Bank Overdrafts Warranties

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8
Q

What is A/P?

A

Used for purchase inventory

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9
Q

Journal entry of A/P?

A

Dr Purchases, Cr A/P

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10
Q

What is a Short Term Note?

A

It is a legal IOU

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11
Q

How do we enter Note Payable when we borrow?

A

Dr Cash, Cr Note Payable

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12
Q

How do we enter Note Payable when it matures?

A

Dr Note Payable, Dr Interest Expense and Cr Cash

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13
Q

What is a Contingency?

A

Potential Liability that has occurred but we don’t know the outcome

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14
Q

What is an example of a Contingency?

A

A lawsuit

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15
Q

How do we journal enter a contingency?

A

Dr Loss on Damage Claim, Cr Estimated Liability for Damages

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16
Q

What is a Long - Term Liability?

A

It is reported in PV of promised payment and extends for a longtime

17
Q

What is a Mortgage bearing note?

A

Property will be taken if loan is not paid, can be short or long, and dealing with one lender

18
Q

What is a Bond?

A

A written promise to pay the face value with interest

19
Q

Bond Issuing Process

A

Sells the Bond - Underwriter - Investor . Trustee watch this 3.

20
Q

What are some advantages to Bond?

A

Do not effect shareholder control, can be very marketable and is tax deductable

21
Q

What is disadvantage to a bond?

A

Requires principal and interest to be paid out at future date

22
Q

What is a contract or nominal rate?

A

It is the stated interest rate

23
Q

What if the bond’s contract rate is above market?

A

It is at premium

24
Q

What if the bond’s contract rate is equal market?

A

At par value

25
Q

What if the bond’s contract rate is below market?

A

At a discount

26
Q

How do we amortize a bond? (SLine)

A

Bond Discount / # of periods

27
Q

How do we calculate Bond Proceeds?

A

PV of principal repayment + PV of Interest Payments

ADMS 2500 (11 decks)

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