ch 15 Financial Management and Accounting

liquidity (455)

The speed at which assets can be turned into cash

tax accounting (455)

This involves preparing taxes and giving people advice on tax strategies.

private accountant (455)

To perform financial accounting tasks in house.

depreciation (461)

To spread out the cost of assets over there useful lives. Depreciation helps keep the accounting equation in balance by matching the expense of the asset with the revenue that asset is expected to generate

net income (464)

And income statement reflects the profitability of the company by showing how much money a company takes in versus how much it spends. The difference between the two is the profit and is referred to as the net income

liabilities (461)

Are all debts and obligations owned by a business to outside creditors, suppliers, or other vendors. Liabilities are listed on the balance sheet in the order in which they will come do

microloan (446)

Are smaller short term loans specific to small businesses. Small business administration created the micro loan program in the 1990s

operating expense (465)

Are the overhead costs incurred when running a business. Operating expenses include sales, general, and Administrative expenses, such as rent, salaries, wages, utilities, insurance.

assets (460)

Are the thing a company owns including cash investments buildings furniture and equipment.

current assets (460)

Are those assets that can be turned into cash within a year.

crowdfunding (447)

As a way to generate funds via donations or more recently investments from individuals.

collateral (446)

As assurance that the business is valuable and worth financing in many cases banks require collateral which is an additional form of security that shares a lender The borrower has another way of repaying the loan

auditing (455)

Is the area of accounting responsible for renewing and evaluating the accuracy of financial records

accounting (453)

Is the large process of tracking a business income and expenses by recording it's financial transactions

Inventory

Is the merchandise A business owns but has not sold. Inventory on hand is necessary to satisfy customers, which makes for good business

corporate accounting (454)

Is the part of an Organization finance department responsible for gathering and assembling data required for key financial statements. Corporate accounting has two separate functions managerial accounting and financial accounting

leverage (449)

Is the practice of borrowing to finance and investment with the expectation that the profits from Ed will be far greater than the interest you will have to pay on the money

factoring (445)

Is the process of selling accounts receivable for cash instead of using them as collateral for a loan

long term liability (461)

Is therefore needed because it provides funds for a period greater than one year

commercial paper (448)

Is unsecured, short-term debt that matures in 720 days nine months or less

ratio analysis (462)

Is used to compare current data to data from previous years, competitors data or industry averages. Ratios a limit the effect of size so you can reasonably compare a large company's performance to a smaller company's performance

owners equity (461)

Is what is left over after you have accounted for all of your assets and taken away all that you owe. Owners equity increases as the business grows

fundamental accounting equation (457)

Liabilities plus owners equity equals assets. The process of bookkeeping centers on the fundamental concepts that what company owns must equal what it does to its creditors plus what it does to its owners

secured loan (446)

Lowes that require collateral are secured loans. Sometimes the collateral is the asset that is being financed

earnings per share (467)

Net income divided by outstanding shares. The portion of a company's profit allocated to stockholders on a per share basis is determined by the calculating the earning per share

equity financing (448)

Occurs when funds are generated by the owners of the company rather than being borrowed from outside lenders

debt financing (448)

Occurs when the company borrows money that it is legally obligated to repay

commercial banks (445)

Or financial institutions, credit union, and saving and loan institutions that raise funds for a business and individuals in the form of a checking and saving account and then use those funds to make loans to businesses and individuals

fixed assets (461)

Our assets that have more long-term use, such as real estate buildings,machinery and equipment. Often decrease in value over time

bonds (449)

Our debt instruments issued by companies or governments with the purpose of raising capital to finance a large project

nonbank lenders (446)

Our financial institutions that extend credit or loan but do not hold deposits

capital budget (441)

Outlines the financial needs for significant purchases, such as real estate, manufacturing equipment, plant expansion, or technology as part of the companies long-range plans

equity (443)

Ownership interest in the form of stocks or issuing debt

managerial accounting (454)

Provides information and analysis to managers within an organization so they can make informed business decisions for example managerial accounting budget can help a company managers determine whether to increase the firm staff or layoff

certified public accountant (445)

Public and private accountants who have passed the rigorous series of examinations given by an American Institute of Certified Public Accountants and who have also met state requirements are given this title

double entry bookkeeping (457)

Recognizes that for every transaction that affects an asset, and equal transaction must also affect either a liability or owners equity.

government and not for profit accounting (455)

Refers to the accounting required for organizations such as legislative bodies and charities that are not forced on generating profits

goodwill (461)

Strong brand recognition an excellent customer or employee relationships is known as Goodwill. Nike has a goodwill of $513 million

gross profit (465)

Tells you how much money a company makes just from the sale of its products and how efficiently it's managers control the cost of goods.

working capital (462)

Tells you what is left over if a company pays off it short-term liabilities with it's short term assets. It is a measure of company short-term financial fitness as well as its efficiency.

public accountant (445)

A company hires someone outside of the company to perform financial accounting

budget (441)

A management tool that outlines a companies planned cash flows, expected operating expenses, and anticipated revenue.

sinking fund (451)

A type of saving fund into which companies deposit money regularly

short term liability (461)

Also known as current liabilities, or obligations A company is responsible for paying within a year or less and are listed first on the right-hand side of the balance sheet.

cost of goods sold (464)

Comprises of expenses a company incurs to manufacture and sell a product, including the price of raw materials used in creating the good along with the labor cost used to produce and sell the items

operating profit margin (466)

Determines a company's profitability of operations. It indicates how efficiently the firms business operations are generating a profit.

intangible assets (461)

Do not have physical characteristics, you can't touch or see them, but they have value nonetheless. Trademarks copyrights for our example of intangible assets

financial statement (459)

Focuses on different area of financial performance. They represent what has happened in the past and provide a companies managers as well as outsiders such as creditors and investors with perspective of what might happen in the future

demand deposit (445)

Funds that can be withdrawn or demanded at any time without prior notice

generally acceptable accounting principles (546)

GAAP, which are standard accounting rules defined by financial accounting standards board and independent organization

unsecured loan (446)

If the firm has excellent credit history a solid relationship with the lending institution, it may get an unsecured loan which does not require collateral

long term financing (448)

Include debts and obligations owned by a company that are due in more than one year, such as mortgage loans for the purchase of land or buildings , Long term leases on equipment and buildings, and bonds issued for large projects.

operating master budget (441)

Includes all the operating cost for an entire organization, including its inventory , sales purchases and manufacturing, marketing and operating expenses.

debt to equity ratio (463)

Indicates the portion of equity and debt the company is using to finance its assets. it can give you a general idea of a company's financial leverage

securities (448)

Investment instruments such as bonds, debt, or stock, equity,

stock certificate (452)

Is a document that represents the owner ship of stock and includes details such as the issuing company's name, the number of shares the certificate represents, and the type of stock being issued

peer to peer lending (447)

Is a growing source of financing. For small businesses as its name implies peer-to-peer lending is the process of individuals lending to each other.

current ratio (463)

Is a measurement used to determine the exchange to which a company can meet its current financial obligations the current ratio is calculated by current assets divided by current liabilities equals current ratio. Sometimes current ratio is called liquidy ratio

financial management (439)

Is a strategic plan and budgeting of funds for firms a short term needs, one year or less, and long-term needs more than one year. Requires a firm to implement controls to ensure its money and budgets

stock (452)

Is a unit of ownership in a company

cash flow budget (442)

Is an Estimate of the companies short-term cash inflows and outflows, and identifies any cash flow gabs for the business.

financial accounting (455)

Is an area of accounting that produces financial documents to eight investors and creditors. Information used for parties outside of the company

venture capital (451)

Is an investment in the company by a group of outside investors, called venture capitalists, who take an active role in the company's management decisions. Venture capitalist seek the roof return in the form of equity or ownership in the company

short term financing (444)

Is any type of financing repair within a year or less

line of credit (445)

Is credit that a manager can access at any time up to an amount agreed upon between the bank and the company

project budget (442)

Is prepared to identify the costs needed to accomplish a project, and endeavor that has a specific start and end date such as installing it and upgrading a computer system or renovating an existing building

financial manager (440)

Is responsible for the financial health of the company.

trade credit (444)

Is the ability to purchase from suppliers goods and services on credit without paying interest. Suppliers will typically request a payment within 3060 or 90 days and give a discount for early payments

cash flow (442)

Is the amount of money a company actually receives and spends over a specific time

revenue (464)

Is the amount of money generated by a business by either selling goods or performing services

bookkeeping (456)

The process of bookkeeping centers on the fundamental concept that one a company owns, it's assets, must equal what it does to the creditors, it's liabilities, plus what it does to its owners, owners equity.

financial plan (440)

Uses information from a firms overall corporate strategic plan, financial statements, and external financial environment to identify the amounts and types of capital the company will need in the short-term and long-term

net income after taxes (456)

What income that is left over. Referred to as the bottom line

internal public offering (452)

When a company for sell stocks to the public, the event is referred to as an internal public offering

retained earnings (461)

Which aren't the accumulated profits a business has held onto for reinvestment in the company.

income statement (459)

Which shows how much revenue the company generated in the. And how much money is spent. The difference between the two is a company's profit or loss

statement of cash flows (459)

Which shows the exchange of money between a company and everyone else it dealt with during the period that is, the cash that came into and went out of the business

balance sheet (459)

Which shows what a company owns and what it borrowed along with the net worth of a business

sabanes oxley act (456)

Which was created to protect investors from corporate accounting fraud the act was passed after a number of publicly traded companies including world Corp. and Enron went bankrupt

gross profit margin (466)

deturmen the company's profitability of production. It indicates how efficiently the firm is using its labor and raw materials to produce goods. Gross profit margin is calculated by revenue minus cost of goods divided by revenue equals gross profit margin