Principles of Finance

Sole Proprietorship business owned by one person who operates it for his or her own profit.
Partnership consists of two or more owners doing business together for profit.
Corporation entity created by law.
Common Stock the purest & most basic form of coporate ownership.
Dividend Periodic distributions of cash to the stockholders of a firm.
Board of Directors group elected by the firm’s stockholders responsible for approving goals and plans, corporate affaris, and expendiures.
Shareholders (stockholders) owners of a coporation whose ownership takes the form of either common or perferred stock.
Treasure Firm’s cheif fiancial manager who manges the firm’s cash,oversee’s it pensionplans, and manages key risk.
Controller Firm’s cheif accoutant, who is responsible for firm’s accounting activites as tax management, financial & cost accounting.
Accrual Basis of Accounting preparation of finacial statements recongizes revenue at the time of the sale & recongizes expenses when they are incurred.
Cash Basis of Accounting Recongizes revenue & expenses only with respect to acutal inflows and outflows of cash.
Risk Chance that actual outcomes may differ from those expected.
Risk Adverse Requiring compensation to bear risk.
Financial Markets Forums in which suppliers of funds and demanders of funds can transact business directly.
Financial Markets Forums in which suppliers of funds and demanders of funds can transact business directly.
Common Stock Purest & most basic form of corporate ownership.
Preferred Stock Special form of ownership having a fixed periodic dividend that must be paid prior to payment or any dividend to common stock.
Corporate Bonds Long term debt instrument indicating that a corporation has borrowed money and promises to repay it.
Capital Stock Authorized shares, max number of shares authorized under the corporations terms.
GAAP Practice & procedure guidelines used to prepare and maintain financial records and reports.
FASB Accounting professions rule-setting body, which authorizes generally accepted accounting principles.
Balance Sheet Summary statement of the firm’s financial position at a given point in time.
Income Statement Provides a financial summary of the firm’s operating results during a specified period.
Current Assets Short-term assets, expected to be convered to cash in less than a year.
Current Liabilties Short-term liabilities expected to be paid within a year.
Long-term Liabilties Liabilties with a future benefit over 1 year. example: notes payable
Statement of Retained Earnings Reconcils the net-income of the year. And cash dividends paid, with the cahnge in retained earnings from Beg. and End.
Retained Earnings Cumulative Total of all earnings net of dividends that have been retained & invested in the firm.
Paid-in-Capital Amount of proceeds in excess.
Statement of Cash Flow Provides a summary of the firms operating investments and finacing cash flow and reconcils the changes.
Ratio Analysis Involves methods of calculating and inerpreting financial ratios to analyze and monitor the firm’s performance.
Current Ratio Measures of liquidity calculated by dividing the firms current assets by its current liabilties.
Quick (Acid-Test) Raio Measures of liquidity calculated by dividing the firms current assets minus inventory by its current liabilties.
Depreciation Time period over which an asset is depreciated.
Pro-Forma Financial Statement Projected ,or forecast, income statements and balance sheets.
Present Value Current dollar value of a future amount. Then invested today at a given interest rate over a specified period to equal the future amount.
Ordinay Annuity An annnity for which cash flows occurs at the end of each period.
Perpetuity An annuity wtih ininite life, providing continus annual cash flows.
Future Value The value at a given future date of an amount placed on a deposittoday and earning interest at a specified rate. Apply compound interest over a specified period of time.

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