Intro to Business Test 282 cards

Tagged as: accounting, business, finance, fitness, marketing, economics, nursing, government, criminal justic, law, act, algebra, math, communications

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Define Accounting

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


Define financial accounting

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


Define generally accepted accounting principles (GAAP)

A set of accounting standards that is used in the preparation of financial statements


Define Financial Accounting Standards Board (FASB)

The private board that establishes the generally accepted accounting principles used in the practice of financial accounting


Define balance sheet

A financial statement that reports the financial position of a firm by identifying and reporting the value of the firm's assets, liabilities, and owners equity


Define the accounting equation

Assets = Liabilities + Owners Equity


Define assets

Resources owned by a firm


Define liabilities

Claims that outsiders have against a firms assets


Define owners equity

The claims a firm's owners have against their company's assets (often called stockholders equity on balance sheets of corporations)


Define income statement

The financial statement that reports the revenues, expenses, and net income that resulted from a firm's operations over an accounting period


Define revenue

Increases in a firm's assets that result from the sale of goods, provision of services, or other activities intended to earn incom


Define accrual-basis accounting

The method of accounting that recognizes revenue when it is earned and matches expenses to the revenues they helped produce


Define expenses

Resources that are used up as the result of business operations


Define net income

The difference between the revenue a firm earns and the expenses it incurs in a given time period


Define horizontal analysis

Analysis of financial statements that compares acccount values reported on these statements over two or more years to identify changes and trends


Define managerial accounting

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


Define cost

The value of what is given up in exchange for something


Define out-of-pocket cost

A cost that involves the payment of money or other resources


Define implicit cost

The opportunity cost that arises when a firm uses owner-supplied resources


Define fixed costs

Costs that remain the same when the level of production changes within some relevant range


Define variable costs

Costs that vary directly with the level of production


Define direct cost

Costs that are incurred directly as the result of some specific cost object


Define indirect costs

Costs that are the result of a firm's general operations and are not directly tied to any specific cost object


Define activity-based costing

A technique to assign product costs based on links between activities that drive costs and the production of specific products


Define budgeting

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


Define operating budgets

Budgets that communicate an organization's sales and production goals and the resources needed to achieve these goals


Define financial budgets

Budgets that focus on the firm's financial goals and identify the resources needed to achieve these goals


Define master budget

A presentation of an organization's operational and financial budgets that represents the firm's overall plan of action for a specified time period


Define financial capital

The funds a firm uses to acquire its assets and finance its operations


Define finance

The functional area of business that is concerned with finding the best sources and uses of financial capital


Define risk

The degree of uncertainty regarding the outcome of a decision


Define risk-return tradeoff

The observation that financial opportunities that offer high rates of return are generally riskier than opportunities that offer lower rates of return


Define financial ratio analysis

Computing ratios that compare values of key accounts listed on a firm's financial statements


Define liquid asset

An asset that can quickly be converted into cash with little risk of loss


Define budgeted income statement

Financial ratios that measure the ability of a firm to obtain the cash it needs o pay its short-term debt obligations as they come due


Define budgeted balance sheet

A projected financial statement that forecasts the types and amounts of assets a firm will need to implement its future plans and how the firm will finance those assets


Define cash budget

A detailed forecast of future cash flows that helps financial managers identify when their firm is likely to experience temporary shortages or surpluses of cash


Define trade credit

Spontaneous financing granted bysellers when they deliver goods and services to customers without requiring immediate payment


Define spontaneous financing

Financing that arises during the natural course of business without the need for special arrangements


Define factor

A company that provides short-term financing to firms by purchasing their accounts receivables at at discount


Define line of credit

A financial arrangement between a firm and a bank in which the bank pre-approves credit up to a specified limit, provided that the firm maintains an acceptable credit rating


Define recolving credit agreement

A guaranteed line of credit in which a bank makes a binding commitment to provide a business with funds up to a specified credit limit at any time during the term of the agreement


Define commercial paper

Short-term promissory notes issued by large corporations


Define retained earnings

The part of a firm's net income it reinvests


Define covenant

A restriction leneders impose on borrowers as a condition of providing long-term debt financing


Define equity financing

Funds provided by the owners of a company


Define debt financing

Funds provided by lenders


Define capital structure

The mix of equity and debt financing a firm uses to meet its permanent financing needs


Define Dodd-Frank Act

A law enacted in the aftermath of the financial crisis of 2008-2009 that strengthened government oversity of financial markets and placed limitations on risky financial strategies such as heave reliance on leverage


Define cash equivalents

Safe and highly liquid assets that many firms list with their cash holdings on their balance sheet


Define U.S. Treasury bills

Short-term marketable IOUs issued by the US federal government


Define money market mutual funds

A mutual fund that pools funds from many investors and uses these funds to purchase very safe, highly liquid securities


Define capital budgeting

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


Define time value of money

The principle that a dollar received today is worth more than a dollar received in the future


Define certificate of deposit (CD)

An interesting-earning deposit that requires the funds to remain deposited for a fixed term. Withdrawal of the funds before the term expires results in a financial penalty


Define present value

The amount of money that, if invested today at a given rate of interest, would grow to become some future amount in a specified number of time periods


Define net present value (NPV)

The sum of the present values of expected future cash flows from an investment, minus the cost of that investment


Define present value

The amount of money that, if invested today at a given rate of interest, would grow to become some future amount in a specified number of time periods


Define net present value (NPV)

The sum of the present values of expected future cash flows from an investment, minus the cost of that investment


Define financial markets

Markets that transfer funds from savers to borrowers


Define depository institution

A financial intermediary that obtains funds by accepting checking or savings deposits and uses these funds to make loans to borrowers


Define credit union

A depository institution that is organized as a cooperative, meaning that it is owned by its depositors


Define savings and loan association

A depository institution that has traditionally obtained most of its funds by accepting savings deposits, which have been used primarily to make mortgage loans


Define securities broker

A financial intermediary that acts as an agent for investors who want to buy and sell financial securities. Brokers earn commissions and fees for the services they provide


Define securities dealer

A financial intermediary that participlates directly in securities marks, buying and selling stocks and other securities for its own account


Define investment bank

A financial intermediary that specializes in helping firms raise financial capital by issuing securities in primary markets


Define exchange traded fund (ETF)

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


Define primary securities market

The market where newly issued securities are traded. The primary market is where the firms that issue securities raise additional financial capital


Define secondary securities market

The market where previously issued securities are traded


Define public offering

A primary market issue in which new securities are offered to any investors who are willing and able to purchase them


Define private placement

A primary market issue that is negotiated between the issuing corporation and a small group of accredited investors


Define initial public offering (IPO)

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


Define underwriting

An arrangement under which an investment banker agrees to purchase all shares of a public offering at an agreed-upon price


Define registration statement

A long, complex document that firms must file with the SEC when they sell securities through a public offering


Define accredited investor

An organization oor individual investor who meets certain criteria established by the SEC and so qualifies to invest in unregistered securities


Define stock exchange

An organized venue for trading stocks and other securities that meet its listing requirements


Define market makers

Securities dealers that make a commitment to continuously offer to buy and sell the stock of a specific corporation listed on the NASDAQ exchange or traded in the OTC market


Define OTC market

The market where securities that are not listed on the exchanges are traded


Define electronic communications network

An automated, computerized securities trading system that automatically matches buyers and sellers, executing trades quicly and allowing trading when securities exchanges are closed


Define market order

An order telling a broker to buy or sell a specific security at the best currently available price


Define limit order

An order to a broker to buy a specific stock only if its price is below a certain level, or to sell a specific stock only if its price is above a certain level


Define stock index

A statstic that tracks how the prices of a specific set of stocks have changed