Comm 180 Test 3

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venture capital: Money that is invested in new or emerging companies that an perceived as having great profit potential.
bookkeeping: The recording of business transactions.
short-term forecast: Forecast that predicts revenues, costs, and expenses for a period of one year or less.
bonds payable: Long-term liabilities that represent money lent to the firm that must be paid back.
maturity date: The exact date the issuer of a bond must pay the principal to the bondholder.
current assets: Items that can or will be converted into cash within one year.
Blue Chip: Respected Stock, like Microsoft
retained earnings: The accumulated earnings from a firm's profitable operations that were kept in the business and not paid out to stockholders in dividends.
pure risk: The threat of loss with no chance for profit.
private accountant: An accountant who works for a single firm, government agency, or nonprofit organization.
institutional investors: Large organizations— such as pension funds, mutual funds, insurance companies, and banks—that invest their own funds or the funds of others.
common stock: The most basic form of ownership in a firm; it confers voting rights and the right to share in the firm's profits through dividends, if offered by the firm's board of directors.
notes payable: Short-term or long-term liabilities that a business promises to repay by a certain date.
demand deposit: The technical name for a checking account; the money in a demand deposit can be withdrawn anytime on demand from the depositor.
over-the-counter (OTC) market: Exchange that provides a means to trade stocks not listed on the national exchanges.
Whose a cheaper lender bank or company?: Corporate Companies
electronic funds transfer (EFT) system: A computerized system that electronically performs financial transactions such as making purchases, paying bills, and receiving paychecks.
risk: The chance of loss, the degree of probability of loss, and the amount of possible loss.
Contingencies: Unanticipated Costs not on Financial Statements
journal: The record book or computer program where accounting data are first entered.
liquidity: How fast an asset can be converted into cash.
credit unions: Nonprofit, member owned financial cooperatives that offer the full variety of banking services to their members.
Return On Equity: Net Income After Taxes / Total Owner's Equity
No Load Mutual Fund: Charge at end
trade credit: The practice of buying goods and services now and paying for them later.
reserve requirement: A percentage of commercial banks' checking and savings accounts that must be physically kept in the bank.
money: Anything that people generally accept as payment for goods and services.
operating budget (master budget): The budget that ties together all of a firm's other budgets; it is the projection of dollar allocations to various costs and expenses needed to run or operate the business, given projected revenues.
law of large numbers: Principle that if a large number of people are exposed to the same risk, a predictable number of losses will occur during a given period of time.
Function of Auditor: Check firm numbers and give opinion
MD&A: Management Discussion and Analysis
equity financing: Funds raised from operations within the firm or through the sale of ownership in the firm.
Under Armour: amount of net cash flow from operations, investing, and financing for 2007: -$30,564,000
public accountant: An accountant who provides his or her accounting services to individuals or businesses on a fee basis.
Price / Earning Ratio: Price reflects future, Earning represents past
nonbanks: Financial organizations that accept no deposits but offer many of the services provided by regular banks (pension funds, insurance companies, commercial finance companies, consumer finance companies, and brokerage houses).
stock exchange: An organization whose members can buy and sell (exchange) securities for companies and investors.
prospectus: A condensed version of economic and financial information that a company must file with the SEC before issuing stock; the prospectus must be sent to prospective investors.
open-market operations: The buying and selling of U.S. government bonds by the Fed with the goal of regulating the money supply.
budget: A financial plan that sets forth management's expectations, and, on the basis of those expectations, allocates the use of specific resources throughout the firm.
Adequate Disclosure: Footnotes on financials
accounting cycle: A six-step procedure that results in the preparation and analysis of the major financial statements.
PCAOB: Public Certified Accounting Oversight Board
M-2: Money included in M-1 plus money that may take a little more time to obtain (savings accounts, money market accounts, mutual funds, certificates of deposit, etc.).
Load Mutual Fund: Charge at beginning
stocks: Shares of ownership in a company.
GASB: Government Accounting Standards Board
Market Efficiency: Pertinent Market Information spreads quickly and equally
financial accounting: Accounting information and analyses prepared for people outside the organization.
exchange-traded funds (ETFs): Collections of stocks that are traded on exchanges but are traded more like individual stocks than like mutual funds.
Basic Earnings Per Share: Net Income After Taxes / Number of Common Stock Shares Outstanding
secured bond: A bond issued with some form of collateral.
The nature of the audit opinion for Under Armour: Fairly represent the consolidated financial information
statement of cash flows: Financial statement that reports cash receipts and disbursements related to a firm's three major activities: operations, investments, and financing.
sinking fund: A reserve account in which the issuer of a bond periodically retires some part of the bond principal prior to maturity so that enough capital will be accumulated by the maturity date to pay off the bond.
uninsurable risk: A risk that no insurance company will cover.
FASB: Financial Accounting Standards Board
accounting: The recording, classifying, summarizing, and interpreting of financial events and transactions to provide management and other interested parties the information they need to make good decisions.
capital expenditures: Major investments in either tangible long-term assets such as land, buildings, and equipment or intangible assets such as patents, trademarks, and copyrights.
pension funds: Amounts of money put aside by corporations, nonprofit organizations, or unions to cover part of the financial needs of members when they retire.
debenture bonds: Bonds that are unsecured (i.e., not backed by any collateral such as equipment).
Federal Deposit Insurance Corporation (FDIC): An independent agency of the U.S. government that insures bank deposits.
unsecured bond: A bond backed only by the reputation of the issuer; also called a debenture bond.
stock insurance company: A type of insurance company owned by stockholders.
commercial bank: A profit-seeking organization that receives deposits from individuals and corporations in the form of checking and savings accounts and then uses some of these funds to make loans.
bond: A corporate certificate indicating that a person has lent money to a firm.
cost of capital: The rate of return a company must earn in order to meet the demands of its lenders and expectations of its equity holders.
annual report: A yearly statement of the financial condition, progress, and expectations of an organization.
independent audit: An evaluation and unbiased opinion about the accuracy of a company's financial statements.
Under Armour's amount of "total" shareholder's equity at December 31, 2007: $280,485,000
rule of indemnity: Rule saying that an insured person or organization cannot collect more than the actual loss from an insurable risk.
Diversification: Find lack of correlation and creates higher return
depreciation: The systematic write-off of the cost of a tangible asset over its estimated useful life.
health maintenance organizations (HMOs): Health care organizations that require members to choose from a restricted list of doctors.
medical savings accounts (MSAs): Taxdeferred accounts that allow people to save money for medical expenses.
M-1: Money that can be accessed quickly and easily (coins and paper money, checks, traveler's checks, etc.).
Swaps: Change interest rates or foreign exchanges
NASDAQ: A nationwide electronic system that communicates over-the-counter trades to brokers.
stock certificate: Evidence of stock ownership that specifies the name of the company, the number of shares it represents, and the type of stock being issued.
Income Statement: Revenue, Expenses, Net Income
government and not-for-profit accounting: Accounting system for organizations whose purpose is not generating a profit but serving ratepayers, taxpayers, and others according to a duly approved budget.
insurable risk: A risk that the typical insurance company will cover.
The amount of net income or loss for 2007 of Under Armour: $52,558,000
dividends: Part of a firm's profits that may be distributed to stockholders as either cash payments or additional shares of stock.
debt financing: Funds raised through various forms of borrowing that must be repaid.
cash budget: A budget that estimates a firm's projected cash inflows and outflows that the firm can use to plan for any cash shortages or surpluses during a given period.
Types of Uninsurable risk: Market, Personal, Political, Operational
Return (R): ((Current Price - Original Price) + Dividend) / (Original Price)
Return On Sales: Net Income / Net Sales
operating expenses: Costs involved in operating a business, such as rent, utilities, and salaries.
capital budget: A budget that highlights a firm's spending plans for major asset purchases that often require large sums of money.
time deposit: The technical name for a savings account; the bank can require prior notice before the owner withdraws money from a time deposit.
Dow Jones Industrial Average (the Dow): The average cost of 30 selected industrial stocks, used to give an indication of the direction (up or down) of the stock market over time.
investment bankers: Specialists who assist in the issue and sale of new securities.
mutual fund: An organization that buys stocks and bonds and then sells shares in those securities to the public.
SEC: Securities and Exchange Comission
risk/return trade-off: The principle that the greater the risk a lender takes in making a loan, the higher the interest rate required.
commercial paper: Unsecured promissory notes of $100,000 and up that mature (come due) in 270 days or less.
short-term financing: Borrowed capital that will be repaid within one year.
cost of goods sold (or cost of goods manufactured): A measure of the cost of merchandise sold or cost of raw materials and supplies used for producing items for resale.
owners' equity: The amount of the business that belongs to the owners minus any liabilities owed by the business.
term-loan agreement: A promissory note that requires the borrower to repay the loan in specified installments.
interest: The payment the issuer of the bond makes to the bondholders for use of the borrowed money.
insurable interest: The possibility of the policyholder to suffer a loss.
income statement: The financial statement that shows a firm's profit after costs, expenses, and taxes; it summarizes all of the resources that have come into the firm (revenue), all the resources that have left the firm, and the resulting net income.
SOX: Sarbanes-Oxley Act
Basal Agreements: International Banking Systems
intangible assets: Long-term assets (e.g., patents, trademarks, copyrights) that have no real physical form but do have value.
premium: The fee charged by an insurance company for an insurance policy.
discount rate: The interest rate that the Fed charges for loans to member banks.
capital budget: A budget that highlights a firm's spending plans for major asset purchases that often require large sums of money.
finance: The function in a business that acquires funds for the firm and manages those funds within the firm.
insurance policy: A written contract between the insured and an insurance company that promises to pay for all or part of a loss.
secured loan: A loan backed by something valuable, such as property.
balance sheet: The financial statement that reports a firm's financial condition at a specific time.
banker's acceptance: A promise that the bank will pay some specified amount at a particular time.
accounts payable: Current liabilities involving money owed to others for merchandise or services purchased on credit but not yet paid for.
long-term forecast: Forecast that predicts revenues, costs, and expenses for a period longer than 1 year, and sometimes as far as 5 or 10 years into the future.
letter of credit: A promise by the bank to pay the seller a given amount if certain conditions are met.
speculative risk: A chance of either profit or loss.
International Monetary Fund (IMF): Organization that assists the smooth flow of money among nations.
promissory note: A written contract with a promise to pay a supplier a specific sum of money at a definite time.
revenue: The total amount of money a business takes in during a given period by selling goods and services.
junk bonds: High-risk, high-interest bonds.
managerial accounting: Accounting used to provide information and analyses to managers within the organization to assist them in decision making.
ratio analysis: The assessment of a firm's financial condition and performance through calculations and interpretations of financial ratios developed from the firm's financial statements.
debit card: An electronic funds transfer tool that serves the same function as checks: it withdraws funds from a checking account.
Savings Association Insurance Fund (SAIF): The part of the FDIC that insures holders of accounts in savings and loan associations.
tax accountant: An accountant trained in tax law and responsible for preparing tax returns or developing tax strategies.
Glass-Steagall: Banking split between investment and commercial
net income or net loss: Revenue left over after all costs and expenses, including taxes, are paid.
auditing: The job of reviewing and evaluating the records used to prepare a company's financial statements.
indenture terms: The terms of agreement in a bond issue.
mutual insurance company: A type of insurance company owned by its policyholders.
preferred stock: Stock that gives its owners preference in the payment of dividends and an earlier claim on assets than common stockholders if the company is forced out of business and its assets sold.
financial control: A process in which a firm periodically compares its actual revenues, costs, and expenses with its projected ones.
unsecured loan: A loan that's not backed by any specific assets.
preferred provider organizations (PPOs): Health care organizations similar to HMOs except that they allow members to choose their own physicians (for a fee).
initial public offering (IPO): The first public offering of a corporation's stock.
Inventory Turnover: Cost of Goods Sold / Average Inventory
Junk Bond: BB or lower rating
Accrual Accounting: accounting that records the impact of a business event as it occurs, regardless of whether the transaction affected cash
barter: The trading of goods and services for other goods and services directly.
revolving credit agreement: A line of credit that is guaranteed by the bank.
commercial finance companies: Organizations that make short-term loans to borrowers who offer tangible assets as collateral.
stock splits: An action by a company that gives stockholders two or more shares of stock for each one they own.
line of credit: A given amount of unsecured short-term funds a bank will lend to a business, provided the funds are readily available.
Current Reserve Ratio: .92
certified management accountant (CMA): A professional accountant who has met certain educational and experience requirements, passed a qualifying exam in the field, and been certified by the Institute of Certified Management Accountants.
cash flow forecast: Forecast that predicts the cash inflows and outflows in future periods, usually months or quarters.
buying stock on margin: Purchasing stocks by borrowing some of the purchase cost from the brokerage firm.
commodity exchange: A securities exchange that specializes in the buying and selling of precious metals and minerals (e.g., silver, foreign currencies, gasoline) and agricultural goods (e.g., wheat, cattle, sugar).
Income Stock: Low risk and large dividends
futures markets: Commodities markets that involve the purchase and sale of goods for delivery sometime in the future.
certificate of deposit (CD): A time-deposit (savings) account that earns interest to be delivered at the end of the certificate's maturity date.
Gramm-Leach-Bliley: If both investment and commercial, more equity to cover losses
Risk Assessment: Identify, Measurement, Monitoring, Control
gross profit (gross margin): How much a firm earned by buying (or making) and selling merchandise.
Forward/Future: Buy goods in the future, contract, futures are standardized and tradeable
Penny Stock: $2 stock or less, very risky
The name of the CPA firm that audited Under Armour: PricewaterhouseCoopers
Cash Accounting: accounting that records transactions only when cash is received or paid
financial statement: A summary of all the transactions that have occurred over a particular period.
fundamental accounting equation: Assets = liabilities + owners' equity; this is the basis for the balance sheet.
financial management: The job of managing a firm's resources so it can meet its goals and objectives.
factoring: The process of selling accounts receivable for cash.
double-entry bookkeeping: The concept of writing every business transaction in two places.
cash flow: The difference between cash coming in and cash going out of a business.
Balance Sheet: Assets = Liability and Equity
smart card: An electronic funds transfer tool that is a combination credit card, debit card, phone card, driver's license card, and more.
long-term financing: Borrowed capital that will be repaid over a specific period longer than one year.
Securities and Exchange Commission (SEC): Federal agency that has responsibility for regulating the various exchanges.
savings and loan association (S&L): A financial institution that accepts both savings and checking deposits and provides home mortgage loans.
liabilities: What the business owes to others (debts).
certified internal auditor (CIA): An accountant who has a bachelor's degree and two years of experience in internal auditing, and who has passed an exam administered by the Institute of Internal Auditors.
ledger: A specialized accounting book or computer program in which information from accounting journals is accumulated into specific categories and posted so that managers can find all the information about one account in the same place.
self-insurance: The practice of setting aside money to cover routine claims and buying only "catastrophe" policies to cover big losses.
What does SEC do?: Keep a fair playing field
financial managers: Managers who make recommendations to top executives regarding strategies for improving the financial strength of a firm.
leverage: Raising needed funds through borrowing to increase a firm's rate of return.
Growth Stock: High risk and small/no dividends
Three Types of Risk: Credit Risk(Loan), Market Risk(Inflation/Interest), Operational Risk (Transactions)
electronic check conversion (ECC): An electronic funds transfer tool that converts a traditional paper check into an electronic transaction at the cash register and processes it through the Federal Reserve's Automated Clearing House.
program trading: Giving instructions to computers to automatically sell if the price of a stock dips to a certain point to avoid potential losses.
World Bank: The bank primarily responsible for financing economic development; also known as the International Bank for Reconstruction and Development.
fixed assets: Assets that are relatively permanent, such as land, buildings, and equipment.
Big Four Accounting Firms: Ernst & Young, PricewaterhouseCoopers, KPMG, Deloitte & Touche
certified public accountant (CPA): An accountant who passes a series of examinations established by the American Institute of Certified Public Accountants.
trial balance: A summary of all the data in the account ledgers to show whether the figures are correct and balanced.
What does SOX do?: Tougher standards for accounting practices

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