MGMT 470: Exam III - Section II

This has a emerged as a new method for entrepreneurs to obtain public financing

crowdfunding for equity

The most common ratio to estimate liquidity calculated by dividing the value of current assets by the value of current liabilities

current ratio

The value of current assets divided by current liabilities

current ratio

can take many forms of debt equity, such as borrowing money from banks, agencies, governments, or individuals

debt

A ______ Cash Flow Stmt.: Developed solely from the cash records

direct

Some metropolitan areas offer specialized zones where special support is provided to companies locating there.

empowerment zones

By definition, Managerial Accounting deals with only _______ information.

financial

(3) Types of Accounting you will need in your business: Formal, rule-based accounting principles

financial accounting

(3) Things Balance Sheet information is used for: Indicates a firm's ability to manage cash flows

financial flexibility

(3) Things Balance Sheet information is used for: A firm's financial strength is a matter of informed judgment

financial strength

(3) Types of Accounting you will need in your business: 1. ________ Accounting 2. ________ Accounting 3. ________ Accounting

financial, managerial, tax

_______ Activities: Activities through which cash is obtained from and paid to lenders, owners, and investors

financing

Breakeven (in units) Equation = ______ ______ / (_____ ____ ____ - _____ ____ ___ ___)

fixed costs / (price per unit - variable cost per unit)

One of the most valuable functions of managerial accounting is planning for _______ _______ _______.

future business activities

(3) Types of Accounting you will need in your business: Based on governmental requirements

tax accounting

_______ Debt: Does NOT give the lender the right to seize any specific asset

unsecured

The difference between an actual and budgeted revenue or cost

variance

The process of determining the effect of price and quantity changes on revenues and expenses

variance analysis

Selling the rights to collect Accounts Receivable (AR) to an entity outside your business

AR Factoring

________ _______are often in economically depressed areas and offer businesses low-cost space and tax advantages for locating there A type of lower customer contact business - (similar to a business incubator)

Empowerment zones

Borrowing money secured by a firm's Accounts Receivable (AR)

Factoring Receivables

_________ accounting is FORWARD-LOOKING, while _________ accounting is only concerned with the PAST.

Managerial, financial

(6) Items that must be reported in the Stmt. Of CFs: 1. CFs from _______ Activities 2. CFs from _______ Activities 3. CFs from _______ Activities 4. Net effect from _______ _______ _______ 5. Net change in _______ _______ during the period 6. _______ investing and financing activities

Operating, investing, financing, foreign exchange rates, cash balance, noncash

Your monthly bank statement parallels the ______ ______ _____.

Retained Earnings statement

A new way to gather investors through the internet

crowdfunding

- _____ _____ is simple in concept but complex in execution. - Management can determine where the business is not meeting goals through examining the report of ________.

Variance analysis, variances

(2) Difficulties in Understanding the Income Statement: 1. First, ______ ____ ______ as revenues 2. Second, ______ ____ _____ revenues

WHAT to report, WHEN to recognize

Money owed to your business by customers who purchased your product on credit

accounts receivable

A statement of what a business owns (assets), what it owes to others (liabilities), and how much value the owners have invested in it (equity)

balance sheet

______ _______ Definition #2: The ______ ______ presents a "snapshot" of financial holdings and liabilities on a specified date.

balance sheet

______ _______ Definition #3: - supplies essential information for outside investors - A _____ _____usefulness is determined by the detail it includes

balance sheet

The _____________: The point at which Total Costs = Gross Revenue

break-even point

A ________ Definition #2: - A quantitative expression of the use of resources necessary to achieve a business's strategic goals - A quantitative plan of action

budget

A ________ Definition #3: A standard against which performance is measured

budget

A ________: A financial plan for the future based on a single level of operations;

budget

Provides an organized and consistent platform for providing necessary information for effective management

budgeting

A statement of the sources and uses of cash in a business for a specific period of time; either direct or indirect statements

cash flow statement

(3) Items of a Master Budget: 1. A _____ _____ budget 2. A _____ _____ budget 3. A _____ budget

cash receipts, cash disbursements, cash

Notes issued by creditworthy corporations

commercial paper

Two forms of short-term financing by issuing a note for cash to another company Issued to be paid to the bearer of the note and fully transferable

commercial paper (short-term debt)

(3) Problems when interpreting balance sheet information - It uses: 1. _______ _______ 2. _______ _______ 3. _______ _______ & _______

historical values, estimated, amounts, omitted assets & liabilities

The primary source of information about a business's profitability

income statement

_________ _________ Definition (2): Used to analyze the effectiveness of business operations

income statement

_________ _________ Definition (3): A statement that lists revenues and expenses and shows the amount of profit a business makes for a specified period of time.

income statement

(6) Common Financial Statements: 1. ________ ________ 2. ________ ________ 3. ________ ________ ________ 4. ________ ____ ________ ________ 5. ________ ___ ________ ________ 6. ________ ___ ________ ________

income statement, balance sheet, statement of cash flows, statement of comprehensive income, statement of retained earnings, statement of owner's equity

A _____ Cash Flow Stmt.: Starts with Net Income and adjusts accruals and deferrals to easily reconcile to other statements

indirect

The Importance about the (6) Common Financials Statements: They articulate how _____ _____ from the _____ through the balance sheet_____ to the _____ _____ _____.

information flows, I/S, B/S, Cash flow statement

_______ Activities: The purchase and sale of land, buildings, equipment, and securities

investing

Legally enforceable future obligations

liabilities

(3) Things Balance Sheet information is used for: Measures the time before an asset can be converted to cash, and the expected time before a liability must be paid

liquidity

(3) Things Balance Sheet information is used for: 1. _______ 2. _______ _______ 3. _______ _______

liquidity, financial flexibility, financial strength

(3) Types of Accounting you will need in your business: Intended for planning, directing, and controlling a business

managerial accounting

Accounting methods that are specifically intended to be used by managers for planning, directing, and controlling a business

managerial accounting

Are there formal rules in managerial accounting? _____, the only issue being what is ______

no, valuable

_______ Activities: Activities involved in producing and selling goods and services

operating

The MOST used item on the Income Statement

operating income

(2) Reasons Variances Occur: 1. Because ______ are different than estimated 2. Because ______ are different than estimated

prices, quantities

Variances can be constructed to show (2) things: 1. The effect of changes in _______ 2. The effect of changes in the _______ used of produced

prices, quantities

The method of organizing and formatting business planning

pro forma financial statements

The sum of all profits and losses, less all dividends paid since the beginning of the business

retained earnings

Income Stmt. Equation: _______ - _______ = _______ _______

revenues - expenses = net income

_______ Debt: Provides a lender with the right to seize specific assets if the loan is not paid

secured

(2) Formats of the Income Statement: i. A ________ Format ii. A ________ Format

single-step, multi-step

Managerial accounting is both a: - _____ ____ ______ that is used in ______ ______ and a - ______ to reduce the ______ of the information used to make a decision

source of information, decision making, methodology, complexity

(4) Reasons Accounting is Important for Small Business Success: 1. You must ________ ________ ________ info for investors to consider ________ 2. ________ require formal financial statement for ________ 3. You cannot fully ________ ________ ________ w/o accounting info 4. ________ & ________ require accounting info

specific accounting info, funding, bankers, loans, know your business, planning & controlling

(2) Examples of Planning for Future Business Activities through Managerial Acct: 1. _______ ______ 2. ______ ______

standard budgeting, profit planning