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Universities » University of Missouri (Mizzou) » MANGMT - Management » 1010 - Contemporary Business Pra.. » Flash Cards

Exam 2 - Flashcards

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Class:MANGMT 1010 - Contemporary Business Practices
Subject:Management
University:University of Missouri - Columbia
Term:Spring 2010
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Asset any economic resources expected to benefit a firm or an individual who owns it.
Liability a debt owned by a firm to an outside organization or individual.
Owners' Equity the amount of money that owners would receive if they sold all of a firm's assets and paid all of its liabilities.
Common Stock a form of corporate equity ownership, a type of security. Among the riskiest of all securities
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Par Value face value of a share of stock at the time it is originally issued, when it first comes out.
Market value the current price of a share in the stock market, what investors are willing to pay, equilibrium price.
Book Value the value of a common stock expressed as total shareholders' equity divided by the number of shares of stock. Measures the relative value worth at a given moment, # of stocks lower then market value what the firm will do in the future.
Blue-chip stock A blue chip stock is the stock of a well-established company having stable earnings and no extensive liabilities.
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Bond security through which an issuer promises to pay the buyer a certain amount of money by a specified future date.
Government Bond issued by the federal government, lowest risk.
Municipal Bond issued state or local government, do not pay tax on interest.
Corporate Bond issued by a company as a source of long-term funding, most common - cover more $$ than government and municipal bonds combined. Longer maturity = higher yield = more risk
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Accounting is a comprehensive system for collecting, analyzing adn communicating financial information. This field has changed so much.
Bookkeeping Bookkeeping is the recording of financial transactions.
Accounting Information System An accounting information system (AIS) is the system of records a business keeps to maintain its accounting system. Organized means by which financial information is recorded and retained for use in accountings statements and management reports.
Controller Top Dog, person who manages all of a firm's accounting activities (chief accounting officer)
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Financial accounting system concerned with external information users (tax payers, investors and government agencies)
Managerial/Management accounting system serves internal users. Internal users are managers and employees, aids managerial decision making
Certified Public Accountant CPA accountant licensed by the state and offering services to the public, outside accountant.
Audit systematic examination of a company's accounting system to determine whether its financial reports fairly represent its operations, financial reports are GAP: general accountnating practices
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Accounting equation assets = liabilities + owners equity
Asset an economic resource expected to benefit a firm or an individual who owns it.
Liability is a debt owned by a firm to an outside organization or individual.
Owners equity the amount of money that owners would receive if they sold all of a firm's assets and pain all of its liabilities.
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Balance sheet supply detailed information about the accounting equation factors. One point in time.
Current assets accounts receivable, tangible
Fixed assets land, factory, equipment
Intangible assets non-monetary assets that cannot be seen, touched or physically measured, patents and trademarks.
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Current Liabilities account payable
Long-term Liabilities outstanding payable for greater then one year.
Income statement (profit and loss statement) lists a firm's annual revenues and expenses so that a bottom line shows annual profit or loss. A video showing what has happened.
Revenues profit + cost
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Statement of cash flows describes a firm's yearly cash receipts and cash payments with three activities; cash flow from operations, cash flow from investing, cash flow from financing.
Revenue recognition is the formal recording and reporting of revenues in financial statements.
Matching a principle stating that expenses will be matched with revenues to determine net income for an accounting period.
Full Disclosure means that financial statements should not include just numbers.
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Solvency ratios both short and long term, estimate risk made up of debt ratio and liquidity ratio
Liquidity ratio short-term solvency ratios, measures a firm's ability to pay its immediate debts.
Current Ratio current assets/current liabilities
Debt Ratio long-term solvency ratio, measures a firm's ability to meet its long-term debts.
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Leverage ability to finance investments through borrowed funds.
Profitability ratios measures a potential earning
Return on Equity measure income for each dollar invested
Earnings per share measures the size of the dividend that a firm can pay shareholders. net income/# of shares outstanding
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Activity Ratios reflect management's use of assets
Inventory Turnover Ratio measures the average number of times that inventory is sold and restocked during the year. High turnover is a good thing, you don't want to hold inventory for a long time Hallmark example
International Transactions international purchases, credit sales and accounting for foreign subsidiaries all involve transactions affected by exchange rates.
International Accounting Standards the international accounting standards board (IASB) tried eliminating national differences in financial reporting procedures. This is extremely important.
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 Asset any economic resources expected to benefit a firm or an individual who owns it.
 Liabilitya debt owned by a firm to an outside organization or individual.
 Owners' Equitythe amount of money that owners would receive if they sold all of a firm's assets and paid all of its liabilities.
 Common Stock a form of corporate equity ownership, a type of security. Among the riskiest of all securities
 Par Valueface value of a share of stock at the time it is originally issued, when it first comes out.
 Market valuethe current price of a share in the stock market, what investors are willing to pay, equilibrium price.
 Book Valuethe value of a common stock expressed as total shareholders' equity divided by the number of shares of stock. Measures the relative value worth at a given moment, # of stocks lower then market value what the firm will do in the future.
 Blue-chip stockA blue chip stock is the stock of a well-established company having stable earnings and no extensive liabilities.
 Bondsecurity through which an issuer promises to pay the buyer a certain amount of money by a specified future date.
 Government Bondissued by the federal government, lowest risk.
 Municipal Bondissued state or local government, do not pay tax on interest.
 Corporate Bondissued by a company as a source of long-term funding, most common - cover more $$ than government and municipal bonds combined. Longer maturity = higher yield = more risk
 Accounting is a comprehensive system for collecting, analyzing adn communicating financial information. This field has changed so much.
 BookkeepingBookkeeping is the recording of financial transactions.
 Accounting Information SystemAn accounting information system (AIS) is the system of records a business keeps to maintain its accounting system. Organized means by which financial information is recorded and retained for use in accountings statements and management reports.
 ControllerTop Dog, person who manages all of a firm's accounting activities (chief accounting officer)
 Financial accounting systemconcerned with external information users (tax payers, investors and government agencies)
 Managerial/Managementaccounting system serves internal users. Internal users are managers and employees, aids managerial decision making
 Certified Public Accountant CPAaccountant licensed by the state and offering services to the public, outside accountant.
 Audit systematic examination of a company's accounting system to determine whether its financial reports fairly represent its operations, financial reports are GAP: general accountnating practices
 Accounting equationassets = liabilities + owners equity
 Assetan economic resource expected to benefit a firm or an individual who owns it.
 Liabilityis a debt owned by a firm to an outside organization or individual.
 Owners equitythe amount of money that owners would receive if they sold all of a firm's assets and pain all of its liabilities.
 Balance sheetsupply detailed information about the accounting equation factors. One point in time.
 Current assetsaccounts receivable, tangible
 Fixed assetsland, factory, equipment
 Intangible assetsnon-monetary assets that cannot be seen, touched or physically measured, patents and trademarks.
 Current Liabilitiesaccount payable
 Long-term Liabilities outstanding payable for greater then one year.
 Income statement (profit and loss statement)lists a firm's annual revenues and expenses so that a bottom line shows annual profit or loss. A video showing what has happened.
 Revenuesprofit + cost
 Statement of cash flowsdescribes a firm's yearly cash receipts and cash payments with three activities; cash flow from operations, cash flow from investing, cash flow from financing.
 Revenue recognitionis the formal recording and reporting of revenues in financial statements.
 Matchinga principle stating that expenses will be matched with revenues to determine net income for an accounting period.
 Full Disclosuremeans that financial statements should not include just numbers.
 Solvency ratiosboth short and long term, estimate risk made up of debt ratio and liquidity ratio
 Liquidity ratioshort-term solvency ratios, measures a firm's ability to pay its immediate debts.
 Current Ratiocurrent assets/current liabilities
 Debt Ratiolong-term solvency ratio, measures a firm's ability to meet its long-term debts.
 Leverageability to finance investments through borrowed funds.
 Profitability ratiosmeasures a potential earning
 Return on Equitymeasure income for each dollar invested
 Earnings per sharemeasures the size of the dividend that a firm can pay shareholders.

net income/# of shares outstanding
 Activity Ratiosreflect management's use of assets
 Inventory Turnover Ratiomeasures the average number of times that inventory is sold and restocked during the year.

High turnover is a good thing, you don't want to hold inventory for a long time

Hallmark example
 International Transactionsinternational purchases, credit sales and accounting for foreign subsidiaries all involve transactions affected by exchange rates.
 International Accounting Standards the international accounting standards board (IASB) tried eliminating national differences in financial reporting procedures.

This is extremely important.
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