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Financial Management > Quiz 2 > Flashcards

Quiz 2 Flashcards

1
Q

accounting

A

encompasses all of the processes necessary to record, report and analyze the financial activities of a company; the language of business bc of interpreting and communicating information about a companies operations and finances

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2
Q

what are the 3 steps in the accounting process

A

record, report, analyze

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3
Q

recording

A

book keeping, lowest levels of capturing operating information, consists of huge volumes of transactions

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4
Q

reporting

A

financial statements, summarized financial activities of a business and conform to standardized formats

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5
Q

analyzing

A

final step; allows managers to reflect on company performance

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6
Q

what are the two groups of users of accounting information

A

internal and external

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7
Q

internal users of accounting info include

A

management, employees, owners, and internal auditors

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8
Q

external users of accounting info include

A

investors, creditors, consumer groups, regulatory agencies, tax authorities

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9
Q

what are questions internal users of accounting information ask

A

finance, marketing, HR, management

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10
Q

what are questions external users of accounting information ask

A

investors, creditors, tax authorities

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11
Q

what are the two branches of accounting

A

managerial and financial

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12
Q

explain managerial accounting

A

internal, plan and control operations, focus on future!!!, internal reports on weekly or daily basis, concerns about employee behavior

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13
Q

explain financial accounting

A

external, investment and credit decisions, focus on the past, financial statements prescribed by GAAP audit by CPAs, summarized quarterly or annually, concern about disclosure

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14
Q

what is the accounting equation

A

assets = liabilities + equity

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15
Q

what are assets

A

resources owned or controlled by a company (cash, vehicles, notes, lands, buildings, accounts, supplies, equipment)

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16
Q

what are liabilities

A

creditors claims on assets (accounts payable, taxes payable, wages payable, notes payable)

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17
Q

what is equity

A

owners claim on assets (contributed capital, retained earnings, dividends)

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18
Q

financial statment

A

quantitatively describes a companies financial well-being summarizing all financial transactions for the entire accounting period

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19
Q

why are financial statements useful

A

to determine ability of a business to generate cash, capability to pay back its debts, track financial results on a trend line, derive financial rations, investigate details of certain business transactions

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20
Q

what are the 4 types of financial statements

A

balance sheet, income statement, statement of shareholders equity, statement of cash flow

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21
Q

balance sheet

A

what a company owns and what it owes at a given point

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22
Q

income statment

A

how much money a company has made and spent over a given time period

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23
Q

statement of shareholders equity

A

show changes in interests of companies shareholders overtime

24
Q

statement of cash flow

A

show exchange of money between company and world over a period of time

25
Q

GAAP

A

generally accepted accounting principles, relevant info affects users decisions, reliable info is trusted by users, comparable info is used in comparisons across years and companies

26
Q

financial accounting standards board

A

private group that sets both broad and specific principles for America companies

27
Q

Securities and Exchange commission

A

government group that establishes reporting requirements for companies that issue stock to the public

28
Q

international accounting standards board

A

insures international standards that identify preferred accounting practices in other countries.

29
Q

what are the 6 basic accounting principles

A 
Going concern
Objectivity
Conservatism
Consistency
Matching
Materiality
30
Q

Sarbanes Oxley

A

passed by congress to help curb financial abuses at companies that issue their stock to the public, importance of effective internal control, desired results include more transparency, accountability, and truthfulness in reporting transactions

31
Q

internal control

A

procedures and processes used by a company to safeguard its assets, process info correctly, ensure compliance with laws and regulations

32
Q

periodicity concept

A

states that each accounting period has an economic activity associated with it, and that the activity can be measured, accounted for, and reported

33
Q

accounting period

A

the time period for which accounts are prepared, usually one calendar year or fiscal year

34
Q

time period principle

A

organization activities can be divided into specific time periods, allows for preparation of interim financial statements

35
Q

transactions

A

basic exchanges of economic considerations between two entities, all transactions should be accurately measured and recorded,

36
Q

money measurement concept

A

stipulates that all business transactions must be expressed in monetary terms

37
Q

accounting methods

A

to be consistent with how individual transactions are grouped into the accounts, the transactions must follow one of two methods in how they are recorded (cash basis accounting, accrual basis accounting)

38
Q

cash basis accounting

A

defined as recording revenue and expenses in the period they are actually received or expended cash (not considered conformity with GAAP, only used in select situations)

39
Q

accrual basis accounting

A

requires that revenue and expenses are recorded in the period in which they are earned or incurred regardless of whether cash is received or disbursed in that period, conforms to GAAP

40
Q

balance sheet

A

statement of financial position, provides a snapshot of an organizations assets, liabilities and shareholder equity at any particular point in time, dated as of, generally historic cost of items and not current value

41
Q

what are the components of a balance sheet

A

assets, liabilities, shareholders equity

42
Q

what are the steps to prepare a balance sheet

A
  1. each asset is listed and added to arrive at total assets
  2. each liability is listen and added to arrive at total liabilities
  3. each stockholders equity team is listed and added to arrive at total stockholders equity
  4. total liabilities and total stockholders equity are added to get total liabilities and stockholders equity
  5. total assets must equal total liabilities and stockholders equity
43
Q

the income statement

A

referred to as the statement of operations, does not reveal alot about changes overtime, records the company revenues and expenses for a specific period and is dated for the period ended of a specific date

44
Q

revenues

A

measure the inflows of assets from selling goods and providing services to customers

45
Q

expenses

A

measure the outflow of assets incurred in generating revenues

46
Q

net income

A

the amount earned after recording all expenses necessary to generate the sales recorded

47
Q

the statement of cash flows

A

reports information about cash receipts, dated “for the period ended” of a specific date, may be used as an analytical tool to assess short term viability of a company, the statement is organized according to the thee major business activities (cash flows from operating activities, investing activities, financial activities)

48
Q

operating activities

A

constitute the revenue generating activities of a business

49
Q

investing activities

A

constitute payments made to acquire long-term assets, as well as cash received from their sale

50
Q

financing activities

A

constitute activities that will alter the equity or borrowings of a business

51
Q

statement of shareholders equity

A

displays components of shareholder’s equity, report how retained earnings have changed over some period and is dated “for the period ended” of an accounting period, these major transactions are recorded as net income (or lose) and the payment of dividends

52
Q

financial ratios

A

can be used to assess a company’s performance, computed by dividing one financial statement item by another, allows users to evaluate company performance by focusing on specific relationships between items on the balance sheet and income statement

53
Q

vertical financial analysis

A

compares financial ratios of a single company over time, relating current results to historical performance and future performance

54
Q

horizontal financial analysis

A

compares financial results of one company’s ratios to ratios of other similar companies, as well as to standard average industrial ratios and the internal deviation of these ratios

55
Q

four types of financial ratios often used in a pharmacy

A

profitability, liquidity, solvency, turnover

56
Q

profitability ratios

A

provide a method to measure the overall success of the company in the daily operations of a business

57
Q

what are the 2 most common used profitability ratios in pharmacies

A

gross profit margin and net profit margin

Financial Management (2 decks)

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