| A | B |
|---|
| Accounting | system recognizing, organizing, analyzing, and financial transactions |
| Financial accounting | prepares financial statements |
| GAAP | set of accounting standards generally accepted when preparing financial statements |
| FASB | private board establishing the generally accepting accounting principles |
| balance sheet | financial statement reporting the value of the firm's assets, liabilities, and owners' equity |
| accounting equation | Assets=Liailities + Owners' Equity |
| assets | Resources owned |
| liabilities | Claims outsiders have on the firm's assets |
| owners'equity | Claims a firm's owners have against company assets |
| income statement | Financial statement reporting income, expenses, and net income |
| revenue | Increass in firm's assets resulting from the sale of goods, provisions of servcies, or other activities intended to earn income |
| expenses | Resources used up as the result of business operations |
| net income | Difference between revenue and expenses during a given time |
| statement of cash flows | Financial statements identifying a firm's sources and uses of cash |
| managerial accounting | Accounting branch providing reports and analysis for managers to make informed decisions |
| cost | Value of what is given up in exchange for something |
| out of pocket costs | Cost that involves the payment of money or other resources |
| fixed costs | Costs that remain the same |
| variable costs | Costs that vary within a level of production |
| budgeting | A management tool used to show how firms will acquire and allocate resources |
| operating budget | Budget that communicate an organization's sales and production goals and the resources needed |
| financial budget | Budgets that focus on the firm's financial goals and identify the resources needed |
| finance | Concerned with finding the best sources and uses of financial capital |
| risk | Degree of uncertainty regarding the outcome of decisions |
| risk-return tradeoff | financial opportunities offering high rates of return are riskier than lower rates of return |
| liquid asset | Asset quickly converted into cash with little risk of loss |
| liquidity ratios | Ratios measuring the ability of firm to obtain the cash it needs to pay short-term debt |
| asset management ratios | Ratio measuring how effectively a firm is using its assets to geenrate revenues or cash |
| financial leverage | Use of debt in a firm's capital structure |
| leverage ratios | Measure the extent to which a firm relies on debt financing |
| cash budget | Detailed forcast of future cash flows that help managers identify when shortages will occur |
| line of credit | Agreement between firm and a bank allowing the firm credit up to a certain amount |
| retained earnings | Part of the firm's net income it reinvests |
| covenants | Restriction lenders impose on borrowers as a condition of providing long-term debt financing |
| Dodd Frank Act | A law enacted after the 2008-2009 financial crisis that placed limitations on risky financial strategies |
| U.S. Treasury Bills | Short term marketable IOUs issued by the US government |
| money market | Mutual fund that pools funds from many investors and purchases safe, highly liquid securities |
| certificate of deposit | An interest earning deposit that requires funds to remain deposited for fixed term |
| present value | The future value of money invested today |
| net present value | The present value minus the cost of the investment |
