BUS 100 Exam 4 Study Guide

Accounting

Accounting is the systematic process of recording, summarizing, analyzing, and reporting financial transactions.

Identify the accounting system and the attributes of the system

An accounting system is a structured framework—such as a Single-Entry or Double-Entry System managed via Manual, Cloud-based, or ERP software—used to record, classify, and summarize financial data. Its key attributes include the basic financial elements (assets, liabilities, equity, revenue, and expenses) and core processes like reporting and internal control

identifying the accounting stakeholders

individuals or groups who rely on financial information to make choices and have an interest in a company's financial results

Identify the accounting cycle and its elements

an 8-step process used to record, process, and summarize business transactions.

• Identify Transactions

• Record Journal Entries

• Post to the general ledger

• unadjusted trial balance

• worksheet and analysis

• adjusting entries

• financial statements

• close the books

Describe the various types of financial statements and how they differ

Balance Sheet: Financial position at one exact point in time.

Income Statement: Profitability over a specific period, like a year or quarter

Cash Flow Statement: Actual cash movement in and out over a period.

Statement of Shareholder’s Equity: Changes in the owners stake over a period

What are the attributes of the key financial statements

The core financial statements are the balance sheet, income statement, and cash flow statement.

What is the fundamental accounting equation

Assets = Liabilities + Equity

Know double entry

Double entry accounting is the standard method of recording every business transaction in two different places to reflect a debit and a credit

What is the GAAP

stands for Generally Accepted Accounting Principles. It is a collection of official rules, standard procedures, and common practices used by companies and accountants to prepare and present financial statements in the United States.

Identify and calculate the financial ratios

Financial ratios are core metrics used to evaluate a company's health by dividing key line items from financial statements like the balance sheet and income statement. Essential groups include liquidity ratios (like the current ratio), profitability ratios (like the net profit margin), and leverage ratios (like the debt-to-equity ratio).

Know how to analyze the financial ratios: liquidity, debt, profitability, and activity ratios

Know the various accounting disciplines

core financial discipline, compliance and control, specialized fields

Identify the ethical parameters in accounting

The ethical parameters in accounting are defined by five fundamental principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behavior

Know the various types of accounting

The main types of accounting include financial accounting, managerial accounting, and tax accounting.

What is financial management

Financial management is the strategic planning, organizing, directing, and controlling of financial activities to manage an organization's monetary resources. Its core components include planning and forecasting, budgeting, and investment decisions. The main goal is to ensure stability, maximize profits, and achieve long-term success.

Identify and know the attributes of long-term and short-term forecasting

Short-term and long-term forecasting differ by time horizon, data inputs, and purpose. Short-term forecasting covers hours to months for operational control, while long-term forecasting spans years for strategic planning.

Identify the various parameters of budgeting (including operating and cash budgets

Budget parameters consist of coordinated financial frameworks including Operating Budgets that track daily revenues and expenses, Cash Budgets that manage short-term liquidity, and Capital Expenditure Budgets that plan long-term asset investments. Together, these components form a comprehensive master budget

Identify the financial planning process

The financial planning process is a step-by-step guide to manage your money, reach life goals, and secure your future. The key steps are setting goals, gathering facts, and building and putting your plan into action

What is a bond, and what are its advantages and disadvantages (for issuing bonds)?

a loan agreement where an investor lends money to a company or government in exchange for regular interest payments and the return of the loan amount later

Advantages: no loss of control, lower costs, and tax deductions

Disadvantages: fixed obligations, higher debt risk, strict rules and cost

What are the various types of bonds

Government (National), Municipal (States, Cities), Corporate (company), and High Yield Bonds (Junk Bonds)

What are the types of government-specific bonds?

Government-specific bonds include U.S. Treasuries, municipal bonds, and agency bonds.

Know the various debt and equity financing, as well as their advantages and

disadvantages

Debt and equity financing are the two main ways to fund a business. Debt involves borrowing money to be repaid with interest, while equity involves selling a share of ownership in the company.

Debt Financing Pros: full control, no profit sharing, tax deductions

Debt Financing Cons: repayment pressure, risk of seizure, strict qualification

Equity Financing Pros: no repayment, no interest, expert help

Equity Financing Cons: loss of control, profit sharing, harder process

Identify and compare the various long-term and short-term financing options (also, what are the advantages and disadvantages of each)

Short-term financing covers needs under one year like cash flow gaps, while long-term financing spans multiple years for major assets. Key options include Short-Term Loans, Long-Term Bank Loans, and Equity Financing, each carrying distinct trade-offs

Short term (Trade Credit/Supplier Credit), Advantages: Fast to set up, no formal bank paperwork, and often interest-free if paid early. Disadvantages: Short repayment window; missing deadlines damages supplier relations

Long term (Term Loans/Commercial Mortgage, Equity Financing): Advantages: Lower periodic payments and lower interest rates than short-term loans, preserving working capital. Disadvantages: Strict approval processes requiring heavy documentation and collateral, plus higher total interest paid over time

Identify the securities and stock markets

Securities markets and stock markets comprise financial networks where fungible, negotiable instruments like stocks, bonds, and exchange-traded funds (ETFs) are issued and traded.

Define IPO

An IPO stands for Initial Public Offering, which is the process where a private company sells its shares of stock to the general public for the first time. It is commonly known as "going public".

Identify the risk and return relationship

The risk and return relationship is a direct, positive connection where higher risk brings higher potential rewards, lower risk brings lower potential returns, and greater risk means a higher chance of losing money

Define and compare mutual funds and ETFs

Mutual funds and ETFs are pooled investment portfolios that differ primarily in how they are traded, priced, and taxed

Securities regulation and the exchange commission

is overseen by the U.S. Securities and Exchange Commission (SEC), an independent federal agency established by the Securities Exchange Act of 1934. Its core mission is to protect investors, maintain fair and orderly markets, and facilitate capital formation

Ethics of investing (insider trading)

Insider trading is fundamentally an ethical violation because it destroys the level playing field of financial markets by allowing individuals with privileged, material non-public information (MNPI) to profit at the expense of uninformed investors. While legal frameworks like those enforced by the U.S. Securities and Exchange Commission (SEC) focus on statutory violations and fraud, the ethical debate centers on fairness, systemic trust, and fiduciary duties.

What is a stock and what are the advantages and disadvantages (for issuing stock)?

A stock is a small piece of ownership in a company. For a business, issuing stock has key pros and cons like raising money without debt, diluting owner control, and paying high setup costs.

Identify the various classifications of stock and their attributes

Stocks are primarily classified by ownership structure, company size, and investment style, with the main types being common stock, preferred stock, and market capitalization categories.

Identify the various types of securities in the market

Financial market securities are tradable financial assets categorized primarily into equity securities, debt securities, and derivatives.

Know the fiscal monetary policy of the Federal Reserve

The Federal Reserve conducts monetary policy (not fiscal policy), which is managed separately from government tax and spending decisions by Congress.

Know the Federal Reserve system

The Federal Reserve System is the central bank of the United States, created by Congress in 1913 to provide a safe, flexible, and stable monetary and financial system

Know the various institutions in the U.S. banking system and how they differ

includes Central Banks, Retail and Commercial Banks, and Credit Unions, which differ by ownership, purpose, and who they serve

Central Banks: does not serve the public. It’s a bank for banks/businesses

Retail and Commercial Banks: focuses on serving regular people

Credit Unions: Any money made goes back to members through lower fees and better interest rates rather than to outside investors

How is technology integrated in banking?

Technology is integrated into banking through digital banking platforms, cloud infrastructure, and AI-driven automation, changing how financial institutions operate and serve customers

How does international banking work?

International banking allows money and investments to cross borders. When you make a transfer or use foreign exchange, your bank uses secure global messaging networks like SWIFT or a web of Correspondent Banks to communicate instructions, convert currencies, and settle the funds in local account

Define money and define bartering

Money is any item or secure record that is generally accepted as payment for goods and services, functioning as a medium of exchange, unit of account, and store of value. Bartering is the direct exchange of goods and services for other goods and services without using money

Know the classifications of money?

Money is classified by its intrinsic backing and material form into commodity money, fiat money, and fiduciary money

Know the Federal Reserve Act

The Federal Reserve Act of 1913 established the Federal Reserve System, the central bank of the United States. Signed into law by President Woodrow Wilson on December 23, 1913, it was designed to provide a safer, more flexible, and more stable monetary and financial system to stop recurring banking panics

Identify the causes of the banking crisis

Banking crises are primarily driven by Interest Rate Risk, Liquidity Mismatches, and Excessive Credit Risk. These factors combine when economic shifts or panics undermine the financial health of institutions

How does the government protect paper money?

The government protects paper money using special materials, hidden design features, and law enforcement