First Business Exam Review

How is a Sole Proprietor taxed?

Taxed as personal income

What is the person who buys a franchise called?

franchisee

What is the fundamental accounting equation?

A = L + OE

Assets that are relatively permanent, such as buildings

Fixed Assets

Assets that can be converted within one year

current assets

Long term, no physical form assets

Intangible assets

The ease with which an asset can be converted into cash is called

Liquidity

Why would Net Profit be in parentheses?

Net Loss

How do you get Gross Profit?

Revenue - cost of goods sold

How do you get Net income?

Gross Profit - operating expenses - taxes

What is the formula for profit margin?

Net Income/ Sales

What is the formula for current ratio

Current Assets / Current Liabilities

What ratio measure the degree to which a firm relies on borrowed funds in its operations

Leverage ratios

Which is a liquidity ratio?

Current ratio

Which is a Leverage Ratio?

Debt to equity ratio

What is the formula for debt to equity ratio

total liabilities/total equity

What are the profitability ratios?

earnings per share, profit margin, return on equity

what is the earnings per share formula?

net income/# of shares outstanding

what is the return on equity formula

net income/equity

which is the an activity ratio?

inventory turnover ratio

What is the numerator always in profitability ratios?

Net Income

Retained earnings and common stock can be found on which financial document? 

Balance Sheet (sharehoolder’s equity)

What is another name for a company Annual Report?

10k

Accounting used to provide information and analyses to managers inside the organization to assist them in decision making is called what?

Managerial Accounting

What is venture capital a form of?

equity

Which budget highlights a firm’s spending for major asset purchases? 

Capital Budget

What shows cash flow in and out during a period?

Cash budget

Which budget ties together all the firm’s other budgets and summarizes its proposed financial activities? 

Master or Operating Budget

In business, short-term financing refers to what time period? 

Less than one year

What does an invoice containing the terms 2/10, net 30 mean? 

2% discount if paid in 20 days, otherwise total is due in 30 days

Selling accounts receivable for cash is called?

Factoring

When a firm decides to “go public”, they sell shares in the primary market.  What acronym represents this activity?

IPO (Initial Public Offering)

What does NYSE stand for?

New York Stock Exchange

What does NASDAQ stand for?

National Association of Securities Dealers Automated Quotations

The volatility of a stock is measure by its?

beta

The federal agency in charge of regulating the various stock exchanges is the?

SEC

How do shareholders profit from their ownership of company shares?

Dividends

What type of shareholders have voting rights?

Common stock

What bond is not backed by collateral?

debenture bond

What is another word for a debenture bond

unsecured bond

The limited liability provided to limited partners means that they are not responsible for the debt of the business beyond?

Their investment

The Board of Directors for a corporation is elected by?

the shareholders

What does DJIA stand for?

Dow Jones Industrial Average