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Asset
any economic resources expected to benefit a firm or an individual who owns it. TERM 2
Liability
DEFINITION 2 a debt owned by a firm to an outside organization or individual. TERM 3
Owners' Equity
DEFINITION 3 the amount of money that owners would receive if they sold all of a firm's assets and paid all of its liabilities. TERM 4
Common Stock
DEFINITION 4 a form of corporate equity ownership, a type of security. Among the riskiest of all securities TERM 5
Par Value
DEFINITION 5 face value of a share of stock at the time it is originally issued, when it first comes out.
Market value
the current price of a share in the stock market, what investors are willing to pay, equilibrium price. TERM 7
Book Value
DEFINITION 7 the value of a common stock expressed as total shareholders' equity divided by the number of shares of stock. Measures the relative value worth at a given moment,
of stocks lower then market value what the firm will do in
the future. TERM 8
Blue-chip
stock
DEFINITION 8 A blue chip stock is the stock of a well-established company having stable earnings and no extensive liabilities. TERM 9
Bond
DEFINITION 9 security through which an issuer promises to pay the buyer a certain amount of money by a specified future date. TERM 10
Government Bond
DEFINITION 10 issued by the federal government, lowest risk.
Controller
Top Dog, person who manages all of a firm's accounting activities (chief accounting officer) TERM 17
Financial accounting
system
DEFINITION 17 concerned with external information users (tax payers, investors and government agencies) TERM 18
Managerial/Management
DEFINITION 18 accounting system serves internal users. Internal users are managers and employees, aids managerial decision making TERM 19
Certified Public Accountant CPA
DEFINITION 19 accountant licensed by the state and offering services to the public, outside accountant. TERM 20
Audit
DEFINITION 20 systematic examination of a company's accounting system to determine whether its financial reports fairly represent its operations, financial reports are GAP: general accountnating practices
Accounting equation
assets = liabilities + owners equity TERM 22
Asset
DEFINITION 22 an economic resource expected to benefit a firm or an individual who owns it. TERM 23
Liability
DEFINITION 23 is a debt owned by a firm to an outside organization or individual. TERM 24
Owners equity
DEFINITION 24 the amount of money that owners would receive if they sold all of a firm's assets and pain all of its liabilities. TERM 25
Balance
sheet
DEFINITION 25 supply detailed information about the accounting equation factors. One point in time.
Income statement (profit and loss statement)
lists a firm's annual revenues and expenses so that a bottom line shows annual profit or loss. A video showing what has happened. TERM 32
Revenues
DEFINITION 32 profit + cost TERM 33
Statement of cash flows
DEFINITION 33 describes a firm's yearly cash receipts and cash payments with three activities; cash flow from operations, cash flow from investing, cash flow from financing. TERM 34
Revenue recognition
DEFINITION 34 is the formal recording and reporting of revenues in financial statements. TERM 35
Matching
DEFINITION 35 a principle stating that expenses will be matched with revenues to determine net income for an accounting period.
Full Disclosure
means that financial statements should not include just numbers. TERM 37
Solvency ratios
DEFINITION 37 both short and long term, estimate risk made up of debt ratio and liquidity ratio TERM 38
Liquidity ratio
DEFINITION 38 short-term solvency ratios, measures a firm's ability to pay its immediate debts. TERM 39
Current Ratio
DEFINITION 39 current assets/current liabilities TERM 40
Debt Ratio
DEFINITION 40 long-term solvency ratio, measures a firm's ability to meet its long-term debts.
Inventory Turnover Ratio
measures the average number of times that inventory is sold and restocked during the year. High turnover is a good thing, you don't want to hold inventory for a long time Hallmark example TERM 47
International Transactions
DEFINITION 47 international purchases, credit sales and accounting for foreign subsidiaries all involve transactions affected by exchange rates. TERM 48
International Accounting Standards
DEFINITION 48 the international accounting standards board (IASB) tried eliminating national differences in financial reporting procedures. This is extremely important.
