Intro to Business Chapter 14-16 2

Growth of Financial Services pg: 516

Individual Retirement Account (IRA) Trust Services

Retained Earnings pg: 484

earnings retained by a firm for its use rather than paid out as dividends

Liquidity pg: 484

ease with which an asset can be converted into cash

Current Ratio pg: 489

financial ratio for measuring a company's ability to pay current debts out of current assets

Currency (Cash) pg: 512

-government-issued paper money and metal coins -Paper money and metal coins are currency (cash) issued by the government and widely used for small exchanges. Law requires creditors to accept it in payment of debts.

Net Income (Net Profit, Net Earnings) pg: 486

-gross profit minus operating expenses and income taxes

Money-Create

-pg 519 As Figure 16.4 shows, the money supply expands because banks are allowed to loan out most (although not all) of the money they take in from deposits.

Time Deposit pg: 513

-bank funds that have a fixed term of time to maturity and cannot be withdrawn earlier or transferred by check -Unlike demand deposits, time deposits, such as certificates of deposit (CDs), have a fixed term, are intended to be held to maturity, cannot be transferred by check, and pay higher interest rates than checking accounts. Time deposits in M-2 include only accounts of less than $100,000 that can be redeemed on demand, with penalties for early withdrawal.

Federal Reserve System-The Fed pg: 520

-central bank of the United States, which acts as the government's bank, serves member commercial banks, and controls the nation's money supply -Perched atop the U.S. financial system and regulating many aspects of its operation is the Federal Reserve System (the Fed), the nation's central bank, established by Congress in 1913.

Commercial Bank pg: 515

-company that accepts deposits that it uses to make loans, earn profits, pay interest to depositors, and pay dividends to owners -Federally insured commercial banks accept deposits, make loans, earn profits, and pay interest and dividends. Some 5,900 commercial banks range from the largest institutions in New York, such as Citigroup, Bank of America, and JPMorgan Chase, to tiny banks dotting the rural landscape. Bank liabilities, or holdings owed to others, include checking accounts and savings accounts. U.S. banks hold assets totaling more than $12 trillion, consisting of a wide variety of loans to individuals, businesses, and governments.

Debt pg: 490

-company's total liabilities -Companies with more debt may find themselves owing so much that they lack the income needed to meet interest payments or to repay borrowed money. -Sometimes, high debt can be not only acceptable but also desirable. Borrowing funds gives a firm leverage, the ability to make otherwise unaffordable investments

Cost of Goods Sold pg: 485

-costs of obtaining materials for making the products sold by a firm during the year -Although cost of revenues is a relevant income statement category for service providers such as Google, goods producers do not use it. Instead, income statements for manufacturing firms such as Procter & Gamble use the corresponding category, cost of goods sold, which are the costs of obtaining materials to make physical products sold during the year.

Operating Expenses pg: 486

-costs, other than the cost of revenues, incurred in producing a good or service -In addition to costs directly related to generating revenues, every company has general expenses ranging from erasers to the CEO's salary. Like cost of revenues and cost of goods sold, operating expenses are resources that must flow out of a company if it is to earn revenues.

Liability pg: 481

-debt owed by a firm to an outside organization or individual -A liability is a debt that a firm owes to an outside party.

Check pg: 512

-demand deposit order instructing a bank to pay a given sum to a specified payee -A check is essentially an order instructing a bank to pay a given sum to a payee. Checks are usually, but not always, accepted because they are valuable only to specified payees and can be exchanged for cash.

Federal Deposit Insurance Corporation (FDIC) pg: 519

-federal agency that guarantees the safety of deposits up to $250,000 in the financial institutions that it insures -The Federal Deposit Insurance Corporation (FDIC) supervises banks and insures deposits in banks and thrift institutions. The FDIC is a government agency, created by President Franklin D. Roosevelt to restore public confidence in banks during the Depression era. More than 99 percent of the nation's commercial banks and savings institutions pay fees for membership in the FDIC. In return, the FDIC guarantees the safety of all accounts—checking, savings, and CDs—of every account owner up to the maximum of $250,000. If a bank collapses, the FDIC promises to pay each depositor for losses up to $250,000 per account.

Savings and Loan Association (S&L) pg: 515

-financial institution accepting deposits and making loans primarily for home mortgages -Savings institutions include mutual savings banks and savings and loan associations. They are also called thrift institutions because they were established decades ago to promote the idea of savings among the general population. Like commercial banks, savings and loan associations (S&Ls) accept deposits, make loans, and are owned by investors. Most S&Ls were created to encourage savings habits and provide financing for homes; they did not offer check services. Today they have ventured into a variety of other loans and services.

Securities Investment Dealer (Broker) pg: 516

-financial institution that buys and sells stocks and bonds both for investors and for its own accounts -Securities investment dealers (brokers), such as Merrill Lynch and A. G. Edwards Inc., buy and sell stocks and bonds for client investors. They also invest in securities by buying stocks and bonds for their own accounts in hopes of reselling them later at a profit. These companies hold large sums of money for transfer between buyers and sellers.

Mutual Savings Bank pg: 515

-financial institution whose depositors are owners sharing in its profits -In a mutual savings bank, all depositors are considered owners of the bank. All profits are divided proportionately among depositors, who receive dividends. About 600 U.S. mutual savings banks attract most of their funds in the form of savings deposits, and funds are loaned out in the form of mortgages.

Activity Ratio pg: 489

-financial ratio for evaluating management's efficiency in using a firm's assets -The efficiency with which a firm uses resources is linked to profitability. As a potential investor, you want to know which company gets more mileage from its resources. Information obtained from financial statements can be used for activity ratios to measure this efficiency.

Short-Term Solvency Ratio pg: 489

-financial ratio for measuring a company's ability to pay immediate debts -Short-term solvency ratios measure a company's liquidity and its ability to pay immediate debts. The most commonly used of these is the current ratio, or "banker's ratio." This ratio measures a firm's ability to generate cash to meet current obligations through the normal, orderly process of selling inventories and collecting revenues from customers. It is calculated by dividing current assets by current liabilities. The higher a firm's current ratio, the lower the risk to investors.

Profitability Ratio pg: 489

-financial ratio for measuring a firm's potential earnings -It's important to know whether a company is solvent in both the long and the short term, but risk alone is not an adequate basis for investment decisions. Investors also want some indication of the returns they can expect. Evidence of earnings power is available from profitability ratios, such as earnings per share.

Solvency Ratio pg: 489

-financial ratio, either short- or long-term, for estimating the borrower's ability to repay debt -What are the chances that a borrower will be able to repay a loan and the interest due? This question is first and foremost in the minds of bank lending officers, managers of pension funds and other investors, suppliers, and the borrowing company's own financial managers. Solvency ratios provide measures of a firm's ability to meet its debt obligations.

Statement of Cash Flows pg: 486

-financial statement describing a firm's yearly cash receipts and cash payments -The SEC requires all firms whose stock is publicly traded to issue a third report, the statement of cash flows, which describes yearly cash receipts and cash payments. Because it provides the most detail about how the company generates and uses cash, some investors and creditors consider it one of the most important statements of all. It shows the effects on cash of three aspects of a business: operating activities, investing activities, and financing activities.

Balance Sheets pg: 483

-financial statement that supplies detailed information about a firm's assets, liabilities, and owners' equity -Balance sheets supply detailed information about the accounting equation items: assets, liabilities, and owners' equity. Because they also show a firm's financial condition at one point in time, they are sometimes called statements of financial position.

Revenue Recognition pg 488

-formal recording and reporting of revenues at the appropriate time -The reporting of revenue inflows, and the timing of other transactions, must abide by accounting principles that govern financial statements. Revenue recognition, for example, is the formal recording and reporting of revenues at the appropriate time. Although a firm earns revenues continuously as it makes sales, earnings are not reported until the earnings cycle is completed.

Money Market Mutual Fund pg: 513

-fund of short-term, low-risk financial securities purchased with the pooled assets of investor-owners -With money market mutual funds, investment companies buy a collection of short-term, low-risk financial securities. Ownership of and profits (or losses) from the sale of these securities are shared among the fund's investors.

Revenues pg: 485

-funds that flow into a business from the sale of goods or services -When a law firm receives $250 for preparing a will or a supermarket collects $65 from a grocery shopper, both are receiving revenues, the funds that flow into a business from the sale of goods or services. In 2012, Google reported revenues of $50.175 (rounded) billion from the sale of advertising and Web-search services to Google Network members, such as AOL. -In the Google income statement, the cost of revenues section shows the costs of obtaining the revenues from other companies during the year.

Operating Income pg: 486

-gross profit minus operating expenses -Operating income compares the gross profit from operations against operating expenses. This calculation for Google ($29.541 billion - $16.781 billion) reveals an operating income, or income before taxes, of $12.760 billion. Subtracting income taxes from operating income ($12.760 billion - $2.023 billion) reveals net income (net profit or net earnings). Google's net income for the year was $10.737 billion.

Full Disclosure pg 489

-guideline that financial statements should not include just numbers but should also furnish management's interpretations and explanations of those numbers -To help users better understand the numbers in a firm's financial statements, GAAP requires that financial statements also include management's interpretations and explanations of those numbers. The idea of requiring input from the manager is known as the full disclosure principle.

Federal Funds Rate (Key Rate) pg: 523

-interest rate at which commercial banks lend reserves to each other, usually overnight -More familiar to consumers, the federal funds rate (or key rate) reflects the rate at which commercial banks lend reserves overnight to each other. Although the Fed can't actually control this rate, which is determined by the supply and demand of bank reserves, it can control the supply of those reserves to create the desired rate.

Discount Rate pg: 523

-interest rate at which member banks can borrow money from the Fed -As the bankers' bank, the Fed loans money to banks. The interest rate on these loans is known as the discount rate. If the Fed wants to reduce the money supply, it increases the discount rate, making it more expensive for banks to borrow money and less attractive for them to loan it. Conversely, low rates encourage borrowing and lending and expand the money supply.

Insurance Company pg: 516

-nondeposit institution that invests funds collected as premiums charged for insurance coverage -Insurance companies accumulate money from premiums charged for coverage. They invest these funds in stocks, real estate, and other assets. Earnings pay for insured losses, such as death benefits, automobile damage, and healthcare expenses.

Finance Company pg: 516

-nondeposit institution that specializes in making loans to businesses and consumers -Finance companies specialize in making loans to businesses and consumers. HFC Beneficial, for example, offers mortgage refinancing and personal loans. Commercial finance companies lend to businesses needing capital or long-term funds. Consumer finance companies devote most of their resources to providing small noncommercial loans to individuals.

Pension Fund pg: 516

-nondeposit pool of funds managed to provide retirement income for its members -A pension fund is a pool of funds that is managed to provide retirement income for its members. Public pension funds in the United States include Social Security and the more than $3 trillion in retirement programs for state and local government employees. Private pension funds, operated by employers, unions, and other private groups, cover about 36 million people and have total assets of $20 trillion, up from $13 trillion during the 2008 recession.

Intangible Asset pg: 484

-nonphysical asset, such as a patent or trademark, that has economic value in the form of expected benefit -Although their worth is hard to set, intangible assets have monetary value in the form of expected benefits, which may include fees paid by others for obtaining rights or privileges—including patents, trademarks, copyrights, and franchises—to your products. Goodwill is the amount paid for an existing business beyond the value of its other assets.

Credit Union pg: 515

-nonprofit, cooperative financial institution owned and run by its members, usually employees of a particular organization -A credit union is a nonprofit, cooperative financial institution owned and run by its members. Its purpose is to promote thrift, careful management of one's money or resources, and to provide members with a safe place to save and borrow at reasonable rates. Members pool their funds to make loans to one another. Each credit union decides whom it will serve, such as a group of employees, people in a particular community, or members of an association. Many universities and the U.S. Navy, for example, have credit unions, among the nation's 7,400 credit unions.

Money-What is pg 510

-object that is portable, divisible, durable, and stable, and that serves as a medium of exchange, a store of value, and a measure of worth -Modern money generally takes the form of stamped metal or printed paper issued by governments. Theoretically, however, just about anything portable, divisible, durable, and stable can serve as money.

AICPA's Code of Professional Conduct

-page 492 -The code of professional conduct for public accountants in the United States is maintained and enforced by the AICPA. The institute identifies six ethics-related areas—listed in Table 15.3—with which accountants must comply to maintain certification. Comprehensive details for compliance in each area are spelled out in the AICPA Code of Professional Conduct. The IMA maintains a similar code to provide ethical guidelines for the management accounting profession.

Global Dispersion of ATMs

-page 518 As Figure 16.3 shows, among the world's more than 2 million ATMs, most are located outside the United States, and many U.S. banks offer international ATM services.

Reserve Requirement pg: 523

-percentage of its deposits that a bank must hold in cash or on deposit with the Fed -The reserve requirement is the percentage of its deposits that a bank must hold, in cash or on deposit, with a Federal Reserve Bank. High requirements mean that banks have less money to lend and the money supply is reduced. Conversely, low requirements permit the supply to expand. Because the Fed sets requirements for all depository institutions, it can adjust them to make changes to the overall supply of money in the economy.

How Banks Create Money

-pg 519 As Figure 16.4 shows, the money supply expands because banks are allowed to loan out most (although not all) of the money they take in from deposits.

Gross Profit pg: 486

-preliminary, quick-to-calculate profit figure calculated from the firm's revenues minus its cost of revenues (the direct costs of getting the revenues) -Managers are often interested in gross profit, a preliminary, quick-to-calculate profit figure that considers just two pieces of data—revenues and cost of revenues (the direct costs of getting those revenues)—from the income statement. To calculate gross profit, subtract cost of revenues from revenues obtained by selling the firm's products.

Earnings Per Share pg: 490

-profitability ratio measuring the net profit that the company earns for each share of outstanding stock -It's important to know whether a company is solvent in both the long and the short term, but risk alone is not an adequate basis for investment decisions. Investors also want some indication of the returns they can expect. Evidence of earnings power is available from profitability ratios, such as earnings per share. Defined as net income divided by the number of shares of common stock outstanding, earnings per share determines the size of the dividend that a firm can pay shareholders.

Individual Retirement Account (IRA) pg: 516

-tax-deferred pension fund that wage earners set up to supplement retirement funds -Individual retirement accounts (IRAs) are tax-deferred pension funds that wage earners and their spouses can set up to supplement other retirement funds. Advantages and drawbacks to various kinds of IRAs—traditional, Roth, and education—are discussed in Appendix III. Many commercial banks offer trust services, the management of funds left in the bank's trust. In return for a fee, the trust department will perform such tasks as making your monthly bill payments and managing your investment portfolio. Trust departments also manage the estates of deceased persons.

Open-Market Operations pg:524

-the Fed's sale and purchase of securities in the open market -Open-market operations refer to the Fed's sale and purchase of securities (usually U.S. Treasury notes and short-term bonds) in the open market, as directed by the Fed's Open-Market Committee. Open-market operations are particularly effective because they act quickly and predictably on the money supply. The Fed buys government securities from a commercial dealer, whose bank account is credited for the transaction, thus giving that bank more money to lend, so this transaction expands the money supply.

Automated Teller Machine (ATM) pg: 518

Automated teller machines (ATMs) allow customers to withdraw money, make deposits, transfer funds between accounts, and access information on their accounts. About 445,000 machines are located in U.S. bank buildings and other locations. Increasingly, ATMs have become multilingual global fixtures.

Financial Institutions pg: 513-515

Commercial Bank, Savings and Loan Association (S&L), Mutual Savings Bank, Credit Union

Electronic Funds Transfer pg: 518

Electronic Funds Transfer (EFT) -communication of fund-transfer information over wire, cable, or microwave -Electronic funds transfer (EFT) provides for payments and collections by transferring financial information electronically. PayPal offers online payments and money transfers among businesses and individuals nationally and internationally, in various currencies, requiring only that recipients have an e-mail address. Automated Teller Machine (ATM)

International Services pg: 517

Letter of Credit Banker's Acceptance Suppose a U.S. company wants to buy a product from a Chinese supplier. For a fee, it can use one or more of three services offered by its bank. It can pay its bank to issue a letter of credit, a promise by the bank to pay the Chinese firm a certain amount if specified conditions are met. Or, it can pay its bank to draw up a banker's acceptance, which promises that the bank will pay some specified amount at a future date.

M-1: The Spendable Money Supply pg: 512

M-1, Currency (cash), Check, Checking Account (Demand Deposit) -Unfortunately, there is no single agreed-on measure of the supply of money. The oldest and most basic measure, M-1, counts only the most liquid, or spendable, forms of money—cash, checks, and checking accounts.

M-2: M-1 Plus the convertible Money Supply pg: 513

M-2, Time Deposit, Money Market Mutual Fund

Functions of Money pg: 511

Money serves three functions: 1 It is a medium of exchange. Like the rancher "trading" money for a new fence, money is used to buy and sell things. Without money, we would be bogged down in a system of barter. 2 It is a store of value. Pity the rancher whose cow gets sick on Monday and who wants to buy some clothes the following Saturday, by which time the cow may have died and lost its value. In the form of currency, however, money can be used for future purchases and "stores" value. 3 It is a measure of worth. Money lets us measure the relative values of goods and services. It acts as a measure of worth because all products can be valued and accounted for in terms of money. For example, the concepts of $1,000 worth of clothes or $500 in labor costs have universal meaning.

Google's Balance Sheet

Page 483

Nondeposit Institutions pg: 516

Pension Fund Insurance Company Finance Company Securities Investment Dealer (Broker)

Federal Deposit Insurance Corporation pg: 519

Preserves confidence by supervising banks and insuring deposits in banks and thrift institutions Commercial banks pay fees for membership in the FDIC Guarantees the safety of all deposits of every account owner up to the current maximum of $250,000 Maintains the right to examine the activities and accounts of all member banks

Calculate Profit pg 485

Profit (or Loss) = Revenues - Expenses

Federal Reserve Districts-12 pg: 522

The Fed consists of 12 districts, as shown in Figure 16.5. Each Federal Reserve Bank holds reserve deposits from and sets the discount rate for commercial banks in its geographic region.

Federal Reserve structure

The Fed consists of a board of governors, a group of reserve banks, and member banks. As originally established by the Federal Reserve Act of 1913, the system consisted of 12 relatively autonomous banks and a seven-member committee whose powers were limited to coordinating the activities of those banks. By the 1930s, however, both the structure and function of the Fed had changed dramatically.

Controlling the Money Supply pg: 523

The Fed is responsible for the conduct of U.S. monetary policy, the management of the nation's economic growth by managing the money supply and interest rates. By controlling these two factors, the Fed influences the ability and willingness of banks throughout the country to loan money.

Federal Reserve-functions

The Government's Bank The Bankers' Bank Check Clearing Controlling the Money Supply -The Fed produces the nation's paper currency and decides how many bills to produce and destroy. It also lends money to the government by buying bonds issued by the Treasury Department to help finance the national deficit. -Individual banks that need money can borrow from the Fed and pay interest on the loans. In addition, the Fed provides storage for commercial banks, which are required to keep funds on reserve at a Federal Reserve Bank. -The Fed also clears checks for commercial banks to ensure that cash is deducted from the check writer's bank account and deposited into the check receiver's account. With electronic payments, however, the number of paper checks processed is falling, with fewer than 7 billion cleared by the Fed in 2012, down from a peak of 60 billion in 2000. -The Fed is responsible for the conduct of U.S. monetary policy, the management of the nation's economic growth by managing the money supply and interest rates. By controlling these two factors, the Fed influences the ability and willingness of banks throughout the country to loan money.

Prime Rate pg:515

Traditionally, banks only offered the lowest rate, or prime rate, to their most creditworthy commercial customers. Most commercial loans are set at markups over prime, like prime + 1, which means 1 percent over the prime rate. To remain competitive with lower-interest foreign banks, U.S. banks offer some commercial loans at rates below prime. Figure 16.2 shows the changes in the prime rate since 2000. Lower rates in 2008-2015 encouraged banks to continue lending in the economic downturn.

Current Asset pg: 484

-asset that can or will be converted into cash within a year -Current assets include cash and assets that can be converted into cash within a year. The act of converting something into cash is called liquidating. Assets are normally listed in order of liquidity, the ease of converting them into cash

Fixed Asset pg: 484

-asset with long-term use or value, such as land, buildings, and equipment -Fixed assets (such as land, buildings, and equipment) have long-term use or value, but as buildings and equipment wear out or become obsolete, their value decreases. Accountants use depreciation to spread the cost of an asset over the years of its useful life.

Selected Provisions of the Sarbanes-Oxley Act

page 480

Financial Statements pg: 483

-any of several types of reports summarizing a company's financial status to stakeholders and to aid in managerial decision making -balance sheet, income statement, statement of cash flows -The results of a firm's transactions and issue reports to help managers make informed decisions. Among the most important reports are financial statements, which fall into three broad categories: balance sheets, income statements, and statements of cash flows.

Accounting Equation Page 481

-Assets = Liabilities + Owners' Equity -used by accountants to balance data for the firm's financial transactions at various points in the year -All accountants rely on record keeping to enter and track transactions. Underlying all record-keeping procedures is the most basic tool of accounting, the accounting equation. See: Asset, liability and owner's equity page 481

Balance Sheets pg: 483-484

-Current Asset -Liquidity -Fixed Asset -Depreciation -Current Liability -Accounts Payable (Payables) -Long-Term Liability -Retained Earnings -Intangible Asset -Goodwill

Long-Term Solvency pg: 490

-Debt -Leverage -Long-term solvency is calculated by dividing debt (total liabilities) by owners' equity. The lower a firm's debt, the lower the risk to investors and creditors.

Income Statements pg: 485

-Income Statement (Profit-and-Loss Statement) -financial statement listing a firm's annual revenues and expenses so that a bottom line shows annual profit or loss revenues, cost of revenues, operating expenses, and net income -The income statement is sometimes called a profit-and-loss statement because its description of revenues and expenses results in a figure showing the firm's annual profit or loss.

Federal Reserve-tools pg: 523

-Reserve Requirement -Discount Rate -Federal Funds Rate (Key Rate) -Open-Market Operations

Reporting Standards and Practices pg: 487

-Revenue Recognition -Full Disclosure

Federal Restrictions on CPA Servicesand Financial Reporting: Sarbox Pg: 480

-Sarbanes-Oxley Act of 2002 (Sarbox or Sox) - enactment of federal regulations to restore public trust in accounting practices by imposing new requirements on financial activities in publicly traded corporations -The financial wrongdoings associated with firms such as ImClone Systems, Tyco, WorldCom, Enron, Arthur Andersen, and others have not gone unnoticed in legislative circles. Federal regulations, in particular the Sarbanes-Oxley Act of 2002 (Sarbox or SOX), have been enacted to restore and maintain public trust in corporate accounting practices.

Analyzing Financial Statements pg: 489

-Solvency Ratio -Profitability Ratio -Activity Ratio

Financial Statements-Analyzing pg: 489

-Solvency Ratio -Profitability Ratio -Activity Ratio

Ratio pg: 489-490

-Solvency Ratio -Profitability Ratio -Activity Ratio -Short-Term Solvency Ratio -Current Ratio

Leverage pg 490

-ability to finance an investment through borrowed funds -In leveraged buyouts, firms have willingly taken on sometimes huge debts to buy out other companies.

Owners' Equity pg: 481

-amount of money that owners would receive if they sold all of a firm's assets and paid all of its liabilities -Owners' equity is the amount of money that owners would receive if they sold all of a company's assets and paid all of its liabilities.

Asset pg: 481

-any economic resource expected to benefit a firm or an individual who owns it -An asset is any economic resource that is expected to benefit a firm or an individual who owns it. Assets for accounting purposes include land, buildings, equipment, inventories, and payments due the company (accounts receivable).

Checking Account (Demand Deposit) pg: 512

-bank account funds, owned by the depositor, that may be withdrawn at any time by check or cash -Checking accounts, or demand deposits, are money because their funds may be withdrawn at any time on demand.

Depreciation pg: 484

accounting method for distributing the cost of an asset over its useful life

Goodwill pg: 484

amount paid for an existing business above the value of its other assets

Letter of Credit pg: 517

bank promise, issued for a buyer, to pay a designated firm a certain amount of money if specified conditions are met

Banker's Acceptance pg: 517

bank promise, issued for a buyer, to pay a designated firm a specified amount at a future date

Code of Professional Conduct pg: 492

code of ethics for CPAs as maintained and enforced by the AICPA

Accounts Payable (Payables) pg: 484

current liability consisting of bills owed to suppliers

Long-Term Liability pg: 484

debt that is not due for at least one year

Current Liability pg: 484

debt that must be paid within one year

Budget pg: 487

detailed statement of estimated receipts and expenditures for a future period of time

Trust Services pg: 516

management by a bank of an estate, investments, or other assets on behalf of an individual

M-2 pg: 513

measure of the money supply that includes all the components of M-1 plus the forms of money that can be easily converted into spendable forms

M-1 pg: 512

measure of the money supply that includes only the most liquid (spendable) forms of money

Google's Income Statement

page 485 -Popularly known as the bottom line, profit or loss is probably the most important figure in any business enterprise. Figure 15.2 shows the 2012 income statement for Google, whose bottom line was $10.737 billion.

Google's Statement of Cash Flows

page 487

Budget: An Internal Financial Statement

page 487 -For planning, controlling, and decision making, the most important internal financial statement is the budget, a detailed report on estimated receipts and expenditures for a future period of time. Although that period is usually one year, some companies also prepare three- or five-year budgets, especially when considering major capital expenditures. The budget differs from the other statements we have discussed in that budgets are not shared outside the company; hence the "internal financial statement" title.

Profitability Ratios: Earnings Power for Owners

page 490

Code of Ethics for CPAs-highlights

page 492

Highlights from the Code of Ethics for CPAs

page 492

Money Supply Growth graph

page 514

Regulation of the Banking System

page 518