Test 4 Flashcards
Accounting
The recording, classifying, summarizing, and interpreting of financial events and transactions to provide management and other interested parties the information they need to make good decisions.
Accounting cycle
A six-step procedure that results in the preparation and analysis of the major financial statements.
Finance
The function in a business that acquires and manages funds within the firm.
3 most common reasons a firm fails
- Undercapitalization
- Poor control over cash flow
- Inadequate expense control
3 steps of financial planning
- Forecasting the firm’s short-term and long-term financial needs
- Developing budgets to meet those needs
- Establishing financial controls to see whether the company is achieving its goals
short-term forecast
Predicts revenue, costs, and expenses for a period of one year or less
Budget
A financial plan that sets forth management’s expectations, and, on the basis of those expectations, allocates the use of specific resources throughout the firm.
Financial control
A process in which a firm periodically compares its revenues, costs, and expenses with its budget.
Trade Credit
The practice of buying goods and services now and paying for them later.
Different forms of short term loans
Secured loan
Unsecured loan
line of credit
factoring
Factoring
The process of selling accounts receivable for cash.
Debt financing
Borrowing money, the company has a legal obligation to repay
Bond
A corporate certificate indicating that an investor has lent money to a firm or government.
Stock
Shares of ownership in a company
Money
Anything that people generally accept as payment for goods and services.
