CSI Chapter 11 – Corporations and Financial Statements: Vocabulary Review

A comprehensive set of vocabulary flashcards covering the key terms and concepts from CSI Chapter 11 on business structures, financial statements, corporate governance, disclosure rules, takeover regulations, and insider trading.

Sole Proprietorship

A business owned and operated by one individual, with no legal separation between the owner and the business.

Unlimited Personal Liability

The owner is personally responsible for all debts and obligations of the business.

General Partnership

A business structure where two or more persons jointly own and manage the business and share unlimited, joint and several liability.

Joint and Several Liability

Each partner is individually and collectively responsible for all partnership debts.

Limited Partnership

A partnership with both general partners (manage, unlimited liability) and limited partners (no management, liability limited to investment).

Limited Partner

A passive investor in a limited partnership whose liability is capped at the amount invested and who cannot participate in management.

Corporation

A separate legal entity that can sue, be sued, own property, and pay taxes independently of its shareholders.

Limited Shareholder Liability

Shareholders’ financial risk is limited to the amount they invested in the corporation.

Double Taxation

Corporate profits are taxed at the corporate level and again at the shareholder level when distributed as dividends.

Private Corporation

A company that restricts share transfers, has ≤50 shareholders, and cannot invite the public to invest.

Public Corporation

A company with shares traded on a stock exchange, unlimited shareholders, and extensive disclosure obligations.

Corporate Bylaws

Internal rules that govern a corporation’s operations, including shareholder, director, officer, and procedural provisions.

Proxy

Legal authority given to someone to vote shares on another shareholder’s behalf.

Information Circular

Document sent to shareholders describing matters to be voted on at a meeting and providing required disclosure.

Proxy Contest

A battle between management and challengers to win shareholder votes via competing proxy solicitations.

Nominee System

Arrangement in which banks, brokers, or CDS hold legal title to shares on behalf of beneficial owners.

Voting Trust

An agreement where shareholders transfer voting rights to a trustee, often during restructurings.

International Financial Reporting Standards (IFRS)

Principles-based global accounting standards emphasizing judgment, transparency, and comparability.

Substance Over Form

IFRS principle requiring transactions to be reported based on economic reality rather than legal form.

Fair Value

Measurement that reflects the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction.

Statement of Financial Position

Financial statement (balance sheet) that shows assets, liabilities, and equity at a specific date.

Assets

Resources controlled by an entity expected to provide future economic benefits.

Liabilities

Present obligations arising from past events, settlement of which is expected to result in an outflow of resources.

Equity

Residual interest in the assets of an entity after deducting liabilities.

Property, Plant & Equipment (PP&E)

Long-term tangible assets used in operations, such as land, buildings, and machinery.

Straight-Line Depreciation

Method spreading the depreciable cost evenly over an asset’s useful life.

Declining Balance Depreciation

Accelerated depreciation method applying a fixed rate to the asset’s decreasing book value each year.

Capitalization

Recording a cost as an asset because it will benefit multiple future periods.

Goodwill

Intangible asset representing excess purchase price over fair value of identifiable net assets in an acquisition.

Intangible Assets

Non-physical assets such as patents, trademarks, copyrights, and franchises.

Investment in Associates

Equity method holding (20–50% ownership) where investor records its share of associate’s profit or loss.

Inventory

Goods held for sale or used in production, classified as raw materials, work-in-progress, or finished goods.

Lower of Cost or Net Realizable Value

Conservative inventory valuation rule preventing asset overstatement.

FIFO

Inventory costing method assuming the earliest goods purchased are the first sold.

Weighted Average Cost

Inventory method using the average cost per unit of all goods available during the period.

Trade Receivables

Amounts owed by customers for credit sales of goods or services.

Allowance for Doubtful Accounts

Contra-asset estimating receivables that are expected to be uncollectible.

Prepaid Expenses

Payments made in advance for goods or services to be consumed in future periods.

Cash Equivalents

Highly liquid investments with original maturities of three months or less and insignificant risk of value changes.

Share Capital

Total amount received by a corporation when it issues shares, recorded at historical cost.

Retained Earnings

Accumulated net profits that have been reinvested in the company rather than distributed as dividends.

Non-Controlling Interest

Equity in a subsidiary not attributable to the parent company, representing minority shareholders’ stake.

Long-Term Debt

Obligations due more than one year after the reporting date, such as bonds or mortgages.

Debenture

Unsecured corporate debt instrument backed only by the issuer’s general credit.

Deferred Tax Liability

Tax payable in future periods arising from temporary differences between accounting and tax treatments.

Working Capital

Current assets minus current liabilities, indicating short-term liquidity.

IFRS 15 Five-Step Model

Revenue recognition framework: identify contract, identify performance obligations, determine price, allocate price, recognize revenue.

Cost of Sales (Cost of Goods Sold)

Direct costs attributable to producing or purchasing goods sold during a period.

Gross Profit

Revenue minus cost of sales.

Gross Margin

Gross profit expressed as a percentage of revenue.

Operating Cash Flow

Net cash generated from operating activities after adjusting net income for non-cash items and working-capital changes.

Free Cash Flow

Operating cash flow minus capital expenditures; measures cash available for debt repayment or dividends.

Material Change

Information that would reasonably be expected to have a significant effect on the market price or value of securities.

Takeover Bid

Offer to acquire more than 20% of a public company’s voting securities.

Early Warning System

Requirement to publicly report ownership when 10% (and each additional 2%) of a public company’s voting shares is acquired.

Minimum Takeover Bid Period

Regulation requiring a takeover bid to remain open for at least 35 days.

Insider

Director, senior officer, or 10%+ beneficial owner of a reporting issuer’s voting securities.

Material, Non-Public Information

Significant information not generally disclosed that could affect an investor’s decision or a security’s price.

Right of Withdrawal

Investor’s statutory right to cancel a securities purchase within two business days of receiving the prospectus.

Right of Rescission

Statutory remedy allowing an investor to void a purchase if a prospectus misrepresentation existed.

Equity Method

Accounting technique for investments with significant influence, recognizing investor’s share of investee profits/losses.

Poison Pill

Shareholder rights plan designed to make a hostile takeover prohibitively expensive or unattractive.

Blackout Period

Time frame when insiders are prohibited from trading the company’s securities, usually around earnings releases.

Finance Costs

Interest and other expenses incurred from borrowing funds.

Professional Management Structure

Separation of ownership and control in a corporation, allowing specialized managers to run the business under board oversight.

Statement of Comprehensive Income

Financial statement detailing revenues, expenses, profit, and other comprehensive income items for a period.