bussiness chapter 2 part 2

Managerial Accounting

Accounting that provides financial information to managers for planning, controlling, and decision-making.

Accounting Equation

Assets = Liabilities + Owner’s Equity.

Three Basic Accounting Statements

Balance Sheet, Income Statement, and Statement of Cash Flows.

Balance Sheet

Shows a company’s assets, liabilities, and equity at a specific point in time.

Income Statement

Shows revenue, expenses, and net income over a period of time.

Statement of Cash Flows

Shows cash inflows and outflows from operating, investing, and financing activities.

Integrity in Accounting

Following ethical standards to ensure financial reports are accurate and honest.

Functions of Money

Money serves as a medium of exchange, unit of value, and store of value.

Monetary Policies

Tools the Federal Reserve uses to control the money supply, such as interest rates and reserve requirements.

Commercial Banks

Provide loans, accept deposits, and offer financial services to individuals and companies.

Credit Unions

Member-owned institutions that offer similar services as banks with lower fees and interest rates.

Investment Banks

Help companies raise money by issuing stocks and bonds; advise on mergers and acquisitions.

Insurance Companies

Provide protection against financial losses in exchange for premiums.

Types of Financial Institutions

Commercial banks, credit unions, investment banks, insurance companies; used by companies for loans, payments, and financial services.

Regulatory Shifts in Commercial Banking

Government law changes that affect how banks operate and compete.

Gramm-Leach-Bliley Act

1999 law allowing banks, investment firms, and insurance companies to merge and offer combined services.

Dodd-Frank Act

2010 law increasing financial regulation and creating the Consumer Financial Protection Bureau (CFPB).

Assessing Risk

Evaluating the likelihood an investment could lose money; higher risk often means higher potential return.

Types of Bonds

Corporate, government, municipal, and convertible bonds.

Investment Banking

Helps companies raise capital and advises on issuing stocks or bonds.

Securities

Financial assets that can be bought or sold, such as stocks and bonds.

Stocks

Shares of ownership in a company; can be common or preferred.