Fitch - BUSN105 - Chapter 14 - Accounting and Finance

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Accounting

The process of collecting, recording, classifying, summarizing, reporting, and analyzing financial activities in a company.

Managerial Accounting

Provides financial information to managers for decision-making regarding operations.

Financial Accounting

Provides financial information to external entities such as lenders and investors.

Generally Accepted Accounting Principles (GAAP)

A set of rules and standards for financial accounting in the US.

Public Accountants

Independent accountants that work for one or more companies for a fee.

Certified Public Accountants (CPA)

Accountants allowed to issue auditing opinions on a company's financial statements.

Auditing

The process of reviewing records used to prepare financial statements.

Sarbanes-Oxley Act (SOX)

A law requiring greater auditor independence and accountability from senior executives.

Assets

Things owned by the firm that have value, such as cash and equipment.

Liabilities

Obligations or debts that a company owes to outside parties.

Owner's Equity

The total amount invested in the company by the owners, minus liabilities.

Double-Entry Bookkeeping

A system that records each transaction in at least two accounts to maintain balance.

Liquidity

The ease of converting an asset to cash.

Current Assets

Assets that will be converted to cash within the next 12 months.

Intangible Assets

Long-term assets with no physical existence, like patents and trademarks.

Depreciation

The process of spreading the cost of a fixed asset over its useful life.

Net Profit Margin

The percentage of revenue remaining after all expenses have been deducted.

Debt-to-Equity Ratio

A measure of the degree to which a company utilizes borrowed money compared to owners' equity.

Balance Sheet

A financial statement that summarizes a company's financial position at a given time.

Income Statement

A financial report that summarizes a company's revenues and expenses over a specific period.

Cash Flow Statement

A financial statement that shows how much cash is generated and used in a given period.