BUS 101 Final Exam (Chapters 9, 17-20, and D, and Lecture Notes)-FINNIN

five standards for a useful form of money

1. Portability 2. Divisibility 3. Stability 4. Durability 5. Uniqueness

Materials Requirement Planning (MRP)

A computer-based operations management system that uses sales forecasts to make sure that needed parts and materials are available at the right time and place.

loan

A debt evidenced by a "note," which specifies the principal amount, interest rate and date of repayment

commercial bank

A financial institution that accepts demand deposits and makes loans and provides other services for the public

Statement of Cash Flows

A financial statement that provides financial information about the cash receipts and cash payments of a business for a specific period of time.

ledger

A group of accounts

Program Evaluation and Review Technique (PERT)

A method for analyzing the tasks involved in completing a given project, estimating the time needed to complete each task, and identifying the minimum time needed to complete the total project.

Banker's Acceptance (BA)

A money market instrument used to finance international and domestic trade. A banker's acceptance is a check drawn on a bank by an importer or exporter of goods and represents the bank's conditional promise to pay the face amount of the note at maturity (normally less than three months).

index fund

A mutual fund that was designed to reduce fees by investing in the stocks and bonds that make up an index

Enterprise Resource Planning (ERP)

A newer version of Materials Requirement Planning (MRP), that combines the computerized functions of all the divisions and subsidiaries of the firm--such as finance, human resources, and order fulfillment--into a single integrated software program that uses a single database.

Credit Union

A nonprofit financial institution that is owned by its members and organized for their benefit.

credit union

A nonprofit financial institution that is owned by its members and organized for their benefit.

Bull Market

A period of increased stock trading and rising stock prices

Statistical Quality Control

A process used to continually monitor all phases of the production process.

letter of credit

A promise by the bank to pay the seller a given amount if certain conditions are met.

stockbroker

A registered representative who works as a market intermediary to buy and sell securities for clients.

sinking fund

A reserve account in which the issuer of a bond periodically retires some part of the bond principal prior to maturity so that enough capital will be accumulated by the maturity date to pay off the bond.

Certificate of Deposit (CD)

A savings alternative in which money is left on deposit for a stated period of time to earn a specific rate of return.

preferred stock

A special type of stock whose owners, though not generally having a say in running the company, have a claim to profits before other stockholders do.

World Bank

A specialized agency of the United Nations that makes loans to countries for economic development, trade promotion, and debt consolidation. Its formal name is the International Bank for Reconstruction and Development.

Operations Management

A specialized area in management that converts or transforms resources (including human resources) into goods and services.

bear market

A steady drop in the stock market over a period of time

Statement of Cash Flows

A summary of the cash receipts and cash payments for a specific period of time, such as a month or a year.

Accounts Payable

Amounts to be paid in the future for goods or services already acquired

capital account

An account used to summarize the owner's equity in a business.

retained earnings

An amount earned by a corporation and not yet distributed to stockholders.

Malcolm Baldrige National Quality Award

An award established by the U.S. Department of Commerce given annually to companies that excel in either manufacturing, services, small businesses, nonprofit, education, and healthcare.

smart card

An electronic funds transfer tool that is a combination credit card, debit card, phone card, driver's license card, and more.

Steps in the Accounting Cycle

Analyze, Record, Transfer, Trial Prepare, Analyze Again

Treasury Bonds

Bonds issued by the federal government, sometimes referred to as government bonds.

debenture bonds

Bonds that are unsecured (i.e., not backed by any collateral such as equipment).

diversification

Buying several different investment alternatives to spread the risk of investing.

operating expenses

Costs involved in operating a business, such as rent, utilities, and salaries.

Debt vs. Equity Financing

Debt is borrowing with promise to eventually pay back, Equity is giving ownership away

stock certificate

Evidence of stock ownership that specifies the name of the company, the number of shares it represents, and the type of stock being issued.

financial managers

Examine financial data and recommend strategies for improving financial performance. They are responsible for paying bills,

general expenses

Expenses incurred that are not related to marketing the company's products

selling expenses

Expenses that are incurred directly in the selling of merchandise.

Yankee bonds

Foreign bonds sold in the US

Short-term Loans Payable

Formal, interest-bearing loans that are expected to be paid back within one year.

by using depositor's funds as input to invest in interest bearing loans

How do commercial banks make a profit?

environment

ISO 14001 is a system that manages a firm's impact on the

standards

ISO is a worldwide nongovernmental federation of national _________________ bodies

ISO 9001

ISO standard related to Quality management

just in time inventory

Inventory system in which companies manufacture or purchase goods just in time for use.

institutional investors

Large organizations - such as pension funds, mutual funds, and insurance companies - that invest their own funds or the funds of others

intangible assets

Long-term assets that have no physical form but do have value such as patents, trademarks, and goodwill.

M-3

M-2 plus big deposits like institutional money market funds

capital expenditures

Major investments in either tangible long-term assets such as land, buildings, and equipment or intangible assets such as patents, trademarks, and copyrights.

Dow Jones Industrial Average

Measure of average of stock prices of major industries

M-1

Money that can be accessed quickly and easily (coins and paper money, checks, traveler's checks, etc.)

venture capital

Money that is invested in new or emerging companies that are perceived as having great profit potential

Managerial Accounting

Provides information and analysis to managers inside the organization to assist them in decision making.

circuit breakers

Restrictions on trading when stock prices or a stock index reaches a specified threshold level.

SEC

Securities and Exchange Commission, an independent federal agency that oversees the exchange of securities to protect investors

Commercial Paper (CP)

Short- term (and usually unsecured) promissory notes issues by large corporations. $100,000 or less, due in 270 days or less

Notes Payable

Short-term or long-term liabilities that a business promises to repay by a certain date.

falling dollar value

The amount of goods and services you can buy with a dollar decreases.

rising dollar value

The amount of goods and services you can buy with a dollar increases.

maturity date of a bond

The date on which the borrower must pay the principal amount to the bondholder

discount rate

The interest rate on the loans that the Fed makes to banks

capital gains

The positive difference between the purchase price of a stock and its sale price.

Statistical Process Control (SPC)

The process of testing statistical samples of product components at each stage of the production process and plotting those results on a graph. Any variances from quality standards are recognized and can be corrected if beyond the set standards.

Return on Sales (ROS)

The ratio of net income to total sales. Tells whether the firm is doing as well as its competitors.

Accounting Cycle

The series of accounting activities included in recording financial information for a fiscal period

time deposit

The technical name for a savings account; the bank can require prior notice before the owner withdraws money from a time deposit.

Operating (Master) Budget

Ties together all the firm's other budgets and summarizes its proposed financial activities.

Equity

____ financing does not involve borrowing money

thousands of events over many months

a PERT network can be made up of

cash budget

a budget that estimates cash inflows and outflows during a particular period like a month or a quarter

bond

a corporate certificate indicating that a person has lent money to a firm (or a government)

Electronic Funds Transfer (EFT)

a disbursement system that uses wire, telephone, or computer to transfer cash from one location to another

savings and loan association

a financial institution that specializes in lending money to buy homes

investment banker

a financial specialist who underwrites and distributes new securities and advises corporate clients about raising new funds

equity financing

a firm selling membership in the company in the form of stock is called

Markets

a key to company growth is providing goods and services to developing

fixed position layout

a layout that brings all resources required to create the product to a central location

process layout

a layout that organizes the transformation process into departments that group related processes

revolving credit agreement

a line of credit that's guaranteed but usually comes with a fee

stock exchange

a market for buying and selling stock

over the counter market

a network of dealers who buy and sell the stocks of corporations that are not listed on a securities exchange

financial control

a process in which a firm periodically compares its actual revenues, costs, and expenses with its budget

continuous process

a production process in which long production runs turn out finished goods over time

intermittent process

a production process in which the production run is short and the machines are changed frequently to make different products

promissory note

a promise to pay a specified amount on demand or at a certain time

term-loan agreement

a promissory note that requires the borrower to repay the loan in specified installments

Six Sigma Quality

a quality measure that allows only 3.4 defects per million opportunities

market order

a request to buy or sell a stock at the current market value

Trial Balance

a summary of all the financial data in the account ledgers that ensures the figures are correct and balanced

financial statement

a summary of all the financial transactions that have occurred over a particular period

statistical process control

a system in which management collects and analyzes information about the production process to pinpoint quality problems in the production system

pension fund

a type of mutual fund that holds assets in order to provide retirement income to its members

annual report

a yearly statement of financial condition

government and not-for-profit accounting

accounting system for organizations whose purpose is not generating a profit but serving ratepayers, taxpayers, and others according to a duly approved budget

money supply

all the money available in the United States economy

2/10, net 30

allows a 2 percent discount off the face value of the invoice if the invoice is paid within 10 days, with a maximum of 30 days to pay it off

quick ratio

also known as acid test, measures cash, marketable securities, and receivables of a firm, in comparison to its current liabilities

private accountant

an accountant who works for a single firm, government agency, or nonprofit organization

stock splits

an action by a company that gives stockholders two or more shares of stock for each one they own

Payroll Debit Cards

an efficient way for some firms to pay their workers and an alternative to cash for those who don't qualify for a credit or debit card

independent audit

an evaluation and unbiased opinion about the accuracy of a company's financial statements

International Monetary Fund (IMF)

an international organization that acts as a lender of last resort, providing loans to troubled nations, and also works to promote trade through financial cooperation

fixed assets

assets that are relatively permanent, such as land, buildings, and equipment

Gannt Chart

bar graph showing production managers what projects are being worked on and what stage they are in at any given time

callable bonds

bonds that the issuing company can redeem (buy back) at a stated dollar amount prior to maturity

capital budget

budget for major capital, or investment, expenditures. major assets

will experience growth

by providing needed goods and services to developing markets a company

par value stock

capital stock that has been assigned a value per share in the corporate charter

current assets

cash and other assets expected to be exchanged for cash or consumed within a year

Financing

cash raised by taking on new debt, or equity capital or cash used to pay business expenses, past debts, or company dividends

operations

cash transactions associated with running the business

investments

cash used in or provided by the firm's investment activities

quality

consistently producing what the customer wants while reducing errors before and after delivery to the customer

$1000

corporate bonds are usually issued in units of

Inventory Turnover Ratio

cost of goods sold/average inventory. measures the speed with which inventory moves through the firm

bond interest

coupon rate is also known as

Liabilities

debts that you owe

FASB

defines generally accepted accounting principles

margin call

demand by a broker that investors pay back loans made for stocks purchased on margin

flexible manufacturing

designing machines to do multiple tasks so that they can produce a variety of products

measures the amount of profit earned for each share of outstanding common stock

diluted earnings per share

As owners, stockholders (usually only holders of common stock) have the right to vote for the company's board of directors. (Typically, one vote is granted for each share of stock.) Issuing new shares of stock can thus alter the control of the firm. Dividends are paid from profit after taxes and are not tax-deductible. The need to keep stockholders happy can affect managers' decisions.

disadvantages of issuing stock

no

do nonbanks accept deposits?

prospectus

document issued to possible buyers of a stocks and bonds outlining the financial condition of the company issuing those securities

Dividends

earnings distributed to stockholders

assets

economic resources owned by a firm

over-the-counter market (OTC)

electronic marketplace for securities not listed on organized exchanges such as the NYSE

Operations Management

ensuring productions are delivered on time, on budget, and to specification is the role of who?

land, labor, capital, entrepreneurship, knowledge

example of inputs

goods, services, ideas

examples of outputs

planning, routing, scheduling, dispatching, follow-up

examples of production control

principal

face value of a bond

NASDAQ

first electronic stock market

character, capacity, capital, collateral, conditions

five c's of credit

(1) the board of governors; (2) the Federal Open Market Committee (FOMC); (3) 12 Federal Reserve banks; (4) three advisory councils; and (5) the member banks of the system.

five parts of the federal reserve system

long-term forecast

forecast that predicts revenues, costs, and expenses for a period longer than 1 year, and sometimes as far as 5 or 10 years into the future

short-term forecast

forecast that predicts revenues, costs, and expenses for a period of one year or less

Cash flow forecast

forecast that predicts the cash inflows and outflows in future periods, usually months or quarters

mutual fund

fund that pools the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets

equity financing

funds provided by the owners of a company. Can be sale of stock, reinvesting earnings, and venture capital

debt financing

funds raised through various forms of borrowing that must be repaid

Financial Accounting

generates financial statements and reports for interested people outside an organization

program trading

giving instructions to computers to automatically sell if the price of a stock dips to a certain point to avoid potential losses

The securities act of 1933

helps protect investors by requiring full disclosure of financial information by firms selling bonds or stock

finance

includes preparing budgets, doing cash flow analysis, and planning for the expenditure of funds on assets

financial transactions

including buying and selling goods

revenue

incoming money

no

is factoring a loan?

US government bond

issued by the federal government; considered the safest type of bond investment

long-term liabilities

liabilities owed for more than a year

unsecured loan

loan guaranteed only by a promise to repay it

secured loans

loans backed by collateral that the bank can claim if the borrowers do not repay them

Bonds Payable

long-term liabilities that represent money lent to the firm that must be paid back

penny stocks

low-priced stocks of small companies that have no track record

debt and equity financing, loans

major sources of long term financing

Financial Planning

making sure you have short and long term money available for the company to use.

modular layout

many companies are moving from an assembly line layout to a

factor

market intermediary that agrees to buy the company's accounts receivable

debt to owners' equity ratio

measures the degree to which the company is financed by borrowed funds that it must repay

M-2

money included in M-1 plus money that may take a little more time to obtain (savings accounts, money market accounts, mutual funds, certificates of deposit, etc.)

undercapitalization, poor cash flow

most common ways firms fail financially

inexpensive resources

one reason for moving production facilities

3 sections of cash flow statement

operating, investing, financing

Accounting

planning, recording, analyzing, and interpreting financial information

new

primary markets handle the sale of ___ securities

public provides services to for a fee to a variety of companies

private vs public accountant

process changes materials

process manufacturing vs assembly processes?

Pension Funds and Government Retirement Funds

provide retirement income in the form of annuities to employees who are covered by a pension plan

Budgeting

quantitative planning through which managers decide how to allocate available money to best accomplish company goals

critical path

related tasks that take the longest to complete

Balance Sheet

reports financial condition on a specific date

review and evaluate standards used to prepare a company's financial statements

role of an auditor?

mortgage bonds

secured bonds are sometimes called

margin rates

set by the board of governors of the Federal Reserve System in the U.S. market

stocks

shares of ownership in a company

exchange traded fund

shares traded on securities markets that represent the legal right of ownership over part of a basket of individual stock certificates or other securities

Treasury Bills (T-Bills)

short-term debt obligations the U.S. government sells to raise money

income statement

shows profit after cost, expense, and taxes

investment bankers

specialists who assist in the issue and sale of new securities

preferred stock

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

growth stocks

stocks in corporations that reinvest their profits into the business so that it can grow

income stocks

stocks that have a consistent history of paying high dividends

Income Statement

summarizes revenues, cost of goods sold, and expenses (including taxes) for a specific period and highlights the total profit or loss the firm experienced during that period.

Depreciation

systematic write-off of the cost of a tangible asset over its estimated useful life.

mass customization

tailoring products to meet the needs of individual customers

municipal bonds

tax-exempt bonds issued by state and local governments

demand deposit

technical name for a checking account

quantitative easing (QE)

technique used by the Federal Reserve to keep interest rates low and encourage banks to take on more loans to stimulate the economy. Also includes the production of of extra money when the economy is suffering

process manufacturing

that part of the production process that physically or chemically changes materials

assembly process

that part of the production process that puts together components

retained earnings

the accumulated earnings from a firm's profitable operations that were reinvested in the business and not paid out to stockholders in dividends

Owner's Equity

the amount remaining after the value of all liabilities is subtracted from the value of all assets

ratio analysis

the assessment of a firm's financial condition using calculations and interpretations of financial ratios developed from the firm's financial statements

open market operations

the buying and selling of government securities to alter the supply of money

Cost of Goods Sold (COGS)

the cost of the merchandise inventory that the business has sold to customers

production

the creation of finished goods and services using the factors of production: land, labor, capital, entrepreneurship, and knowledge

production

the creation of goods and services

cash flow

the difference between cash going in and cash going out of a business

Liquidity

the ease with which an asset can be converted into the economy's medium of exchange

Initial Public Offering (IPO)

the first time a company issues stock that may be bought by the general public

purchasing

the function in a firm that searches for high-quality material resources, finds the best suppliers, and negotiates the best price for goods and services

Federal Deposit Insurance Corporation (FDIC)

the government agency that insures customer deposits if a bank fails

Financial Management

the job of managing a firm's resources so it can meet its goals and objectives

Auditing

the job of reviewing and evaluating the information used to prepare a company's financial statements

line of credit

the maximum amount of money a creditor will allow a credit user to borrow

discount rate

the minimum interest rate set by the Federal Reserve for lending to other banks.

common stock

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

bottom line

the net income (or perhaps net loss) the firm incurred from revenue minus sales returns, costs, expenses, and taxes over a period of time

Savings Association Insurance Fund (SAIF)

the part of the FDIC that insures holders of accounts in savings and loan associations

reserve requirement

the percentage of deposits that banking institutions must hold in reserve

facility layout

the physical arrangement of resources (including people) in the production process

trade credit

the practice of buying goods and services now and paying for them later

double-entry bookkeeping

the practice of writing every business transaction in two places

risk-return trade-off

the principle that the greater the risk a lender takes in making a loan, the higher the interest rate required

facility location

the process of selecting a geographic location for a company's operations

Factoring

the process of selling accounts receivable for cash

assembly

the process that puts together parts

lean manufacturing

the production of goods using less of everything compared to mass production

Current Ratio

the ratio of a firm's current assets to its current liabilities

bookkeeping

the recording of business transactions

board of governers

the seven-member board that oversees the Federal Reserve System

Blue Chip Stock

the stock of a large, well-established and financially sound company that has operated for many years

production management

the term used to describe all the activities managers do to help their firms create goods

Stockholders' Equity

the value of what stockholders own

Form Utility

the value producers add to materials in the creation of finished goods and services

to build and deliver products in response to demand, provide good quality, and provide at the lowest possible cost

three basic requirements of production

1.) forecasting the firm's financial needs 2.) developing budgets 3.) establishing financial controls

three steps of the financial planning process?

reserve requirement, open market operations, and discount rate

three tools the federal reserve uses

capital, cash, and operating/master

three types of budgets

common and preferred

two classes of stock a company can distribute

Treasury Notes (T-Notes)

type of government bond issued with shorter maturities than T-bonds

production

using factors such as land labor and capital to create goods and services is referred to as

assets

what are economic resources owned by a firm?

pockets of unemployment

what can geographic shifts in production lead to?

all changes in the firms cash that ave occurred from operations

what do accountants analyze?

the amount of profit a company earned per each share of outstanding stock

what do basic earnings per share help determine?

how effectively a firm's managers are using its various resources to achieve profits

what do profitability (performance) ratios measure?

an ERP system

what does JIT require for planning?

inventory management, quality control, production scheduling, and follow up services.

what does operations management include?

form utility and value

what does the production process add to materials?

income statement

what financial statement shows the firms profit after costs, expenses, and taxes?

manufacturing

what has production historically meant?

manufacturing and service sector companies

what kind of firms use operations managers

They provide for an orderly retirement (repayment) of a bond issue. They reduce the risk the bond will not be repaid. They support the market price of the bond because they reduce the risk the bond will not be repaid.

what makes sinking funds attractive?

need to inspect required more people, scrapping and correcting the product was costly, and dissatisfied customers may take their business elsewhere

what problems arose when holding quality control at the end of the production line?

analyzing and sequencing tasks that need to be done, (2) estimating the time needed to complete each task, (3) drawing a PERT network illustrating the information from steps 1 and 2, and (4) identifying the critical path.

what steps are used in PERT?

NASDAQ

what was the world's first electronic stock market?

Technology

what, toward the end of the 20th, changed and simplified the accounting process?

financial controls

when a form compares its revenues to its expenses

curbs

when a key computer is turned off and program trading is halted (called curbs in)

flexible manufacturing

when machines are programmed to perform multiple tasks in order to produce a variety of products, a firm is said to be employing what?

1792

when was the NYSE founded?

day to day needs, salaries, credit operations, acquiring inventory, making capital expenditures

why does a firm need funds?

because earnings help stimulate the firm's growth and provide for stockholders' dividends.

why is EPS described as a revealing ratio?

telecommuting

working from home via computer

ISO

worldwide federation of national standards for more than 170 countries