Business 120 Test 2

___ accountant combines their knowledge of accounting with investigative skills. These accountants can help detect adn investigate tax evasion. embezzlement, money laundering, and securities fraud

Forensic accounting

taken together the body of principles that guides the financial accounting process used to create financial statements is referred to as ___

GAAP Generally Accepted Accounting Principles

Horizontal Merger

a combination of two firms that are in the same industry

nonprofit corporation

a corporation that does not seek to earn a profit and differs in several fundamental respects from c corporations

Corporation

a form of business ownership in which the business is considered a legal entity that is separate and distinct form its owners

Limited Liability Company (LLC)

a form of business ownership that offers both limited liability to its owners and flexible tax treatment

Sole Proprietorships

a form of business ownership with a single owner who usually actively manages the company

Franchise

a licensing arrangement under which a franchisor allows franchisees to use its name, trademark, products, business methods, and other property in exchange for monetary payments and other considerations

Budget

a management tool that explicitly shows how a firm will acquire and use the resources needed to achieve its goals over a specific time period

general partnership

a partnership in which all partners can take an active role in managing the business and have unlimited liability for any claims against the firm

market niche

a small segment of a market with fewer competitors than the market as a whole

Standard and Poor's 500

a stock index based on prices of 500 major U.S. corporations in a variety of industries and market sectors

dividends

a sum of money paid regularly by a company to its shareholders out of its profits (or reserves)

accounting

a system for recognizing, organizing, analyzing, and reporting info about the financial transactions that affect an organization

Partnership

a voluntary agreement under which two or more people act as co-owners of a business for profit

Dow Jones Industrial Average

an index that tracks stock prices of 30 large, well known U.S. corporations

Mutual Funds

an institutional investor that raises funds by selling shares to investors and uses the accumulated funds to but a portfolio of many different securities

Stockholder

an owner of a corporation; common can vote compared to preferred

financial planning

establishes appropriate objectives and goals for the firm

the party in a franchise relationship that pays for the right to use resources supplied by another business entity is known as the ___

franchisee

adverse opinion in financial statements

indicate that the financial statements do not present the financial condition, results of operations, and cash flows in accordance with GAAP

angel investors

individuals who invest in start-up companies with high growth potential in exchange for a share of ownership

necessity entrepreneurs

launch their business because they believe it is their only economic option

What a firm owes its creditors ___

liabilities

advantages of a corporation

limited liability permanence ease of transfer of ownership ability to raise large amounts of financial capital ability to make use of specialized management

a ___ measures the ability to pay short term liabilities as they come due

liquidity ratio

four basic ratios are __

liquidity, asset management, leverage, and profitability

in a ___ two or more companies agree to combination of equals, creating one new company from the two previously independent companies

merger

Equity

more flexible and less risky than debt financing; this type of financing comes from two major sources; retained earnings and money directly invested by stockholders who purchase newly issued stock

c corporation

most common type of corporation, which is a legal business entity that offers limited liability to all of its owners, who are called stockholders

Entrepreneurs

people who risk their time, money, and other resources to start and manage a business

in the ___ corporations raise additional financial capital by issuing and selling new securities while in the ___ investors trade previously issued securities

primary market; secondary market

leverage ratio

ratio that measures the extent to which a firm relies on debt financing in its capital structure

when a firm reinvests some of its new income rather than distributing it to the owners the result is an increase in the forms___

returned earnings

Suzzanne Limely was just elected to the board of directors at United Bank Corporation. As a board member she is expected to represent the interest of the ___

stakeholders/ shareholders

Financial Accounting

the branch of accounting that prepares financial statements for use by owners, creditors, suppliers, and other external stakeholders

Managerial Accounting

the branch of accounting that provides reports and analysis to managers to help them make informed business decisions

a key advantage of a corporation is that ___

the owners maintain limited liability

capital budget

the process a firm uses to evaluate long-term investment proposals

Capital Gain

the return on an asset that results when its market price rises above the price the investor paid for it

___ are companies that invest in start-up businesses with high growth potential in exchange for an ownership stake

venture capital firms

Characteristics of successful entrepreneurs

vision, self-reliance, energy, confidence, tolerance of certainty, tolerance of failure

Cash equivalents include all of the following except a. commercial paper b. inventory c. money d. market mutual funds e. t-bills

b. inventory

in its narrowest sense, a firm's ___ consist of its holdings of currency and demand deposits

cash

three basic types of securities corporations issue to raise long term financial capital are ___

common stock, preferred stock, and bonds

ratio analysis

computing ratios that compare values of key accounts listed on a firm's financial statements examples include: liquidity, asset management, financial leverage, and profitability ratios

a ___ allows you to make purchases now and to defer the payment into the future

credit card

Credit Policy

"put the card down"

__ encompasses the routine procedures involved in recording financial transactions while ___ goes further by analyzing and interpreting this information and communication the results to stakeholders

Book Keeping; Auditing