EXAM 3 ALL

What is accounting?

System for recognizing, organizing, analyzing, and reporting information about the financial transactions that affect an organization

What is the primary goal of accounting?

To provide users with relevant, timely information that can help them make better economic decisions

What is financial accounting?

A branch of accounting that prepares financial statements for use by owners, creditors, suppliers, and other external stakeholders

What are the main types of financial statements?

Balance Sheets, Income Statements and Statements of Cash Flows

What does a balance sheet do?

Reports the financial position of a firm by identifying and reporting the value of the firm’s assets, liabilities, and the owner’s equity

What does the accounting equation state?

Assets equal liabilities plus the owner’s equity

What does an income statement do?

Reports revenues, expenses, and net income that resulted from a firm’s operations over an accounting period

What does a statement of cash flow do?

Identifies the amount of cash that flowed into and out of a firm through operating, investing, and financing activities

What is budgeting?

A management tool that shows how a firm will acquire and allocate the resources needed to achieve its goals over a specific time period

What is the purpose of budgeting?

Facilitates planning by requiring managers to translate goals into measurable quantities and identify the specific resources needed to achieve goals

What are the types of budgets?

Operating, Finance and Master

What is the purpose of an operating budget?

To communicate an organization’s sales and production goals and the resources needed to achieve them

What is the purpose of a financial budget?

To focus on a firm’s financial goals and identify the resources needed to achieve them

What is the purpose of a master budget?

To represent a firm’s overall plan of action for a specified time period

How does financial and managerial accounting differ in who each provides information to?

Financial provides information to external stakeholders while managerial provides information to internal stakeholders

How does financial and managerial accounting differ in the information each focuses on?

Financial focuses on financial information while managerial focuses on both financial and non-financial information

What are the different cost concepts of managerial accounting?

Out-of-pocket, implicit, fixed and variable

What defines an out-of-pocket cost?

It involves payment of money or other resources

What defines an implicit cost?

It arises when a firm uses owner-supplied resources

What defines a fixed cost?

It remains the same when the level of production changes within some relevant range

What defines a variable cost?

It varies directly with the level of production

What are direct costs?

Incurred directly as a result of some specific cost object

What are examples of direct costs?

Direct labor, direct materials and manufacturing supplies

What are indirect costs?

The result of a firm’s general operations, is not directly tied to any specific cost object

What are examples of indirect costs?

Rent, utilities, general office expenses

What is activity-based costing (ABC)?

A technique to assign product costs based on links between activities that drive costs and the production of specific products

What is Finance?

A functional area of business that is concerned with finding the best sources and uses of financial capital

What is financial capital?

Funds that a firm uses to acquire assets and finance its operations

What is the goal of financial management?

To maximize the value of a firm to it’s owners

What social responsibility foes a firm have?

To respect the needs of all stakeholders

What is risk?

A degree of uncertainty regarding the outcome of a decision

What is risk-return tradeoff?

The observation that financial opportunities that offer high rates of return are riskier than those offering lower rates of return

What is financial ratio analysis?

Computing ratios that compare values of key accounts listed on financial statements

What are the different types of financial ratio analysis?

Liquidity, asset management, leverage and pofitability

What do liquidity ratios measure?

The ability of a firm to obtain the cash it needs to pay its short-term debt as they come due

What do asset management ratios measure?

How effectively a firm uses it’s assets to generate revenue

What do leverage ratios measure?

The extent to which a firm relies on debt financing in its capital structure

What do profitability ratios measure?

The rate of return a firm earns on various measures of investment

What are the different planning tools?

Budgeted income statements, budgeted balance sheets, and cash budgets

What does a budgeted income statement do?

Helps estimate and evaluate a business' revenue and expenditure

What does a budgeted balance sheet do?

Presents the estimated value of a startup's assets, liabilities, and equity in the foreseeable future

What does a cash budget do?

Provides an estimation of the cash flows of a business over a specific period of time

What are the sources of short-term financing?

Trade credit, factor, short-term bank loans (line of credit or revolving credit agreements, and commercial paper

What are the sources of long-term financing?

Direct investments from owners, long-term debt, term loans and corporate bonds

What does equity financing refer to?

Funds provided by the owner of a company

What is does debt financing refer to?

Funds provided by lenders (creditors)

What is capital structure?

The mix of equity and debt financing that a firm uses to meet its permanent financing needs

What are different types of assets?

Cash, accounts receivable and inventories

What is capital budgeting?

The procedure a firm uses to evaluate long-term investment proposals

What do financial managers do?

Measure the benefits and costs of long-term investment proposals in terms of the cash flows they generate

What is present value?

The amount of money that, if invested today at a given rate of interest, would grow to become some future amount in a specified number of periods

What is net present value (NPV)?

The sum of the present values of expected future cash flows from an investment minus the cost of that investment

What do financial markets do?

Transfer funds from savers to borrowers

What are the roles of financial markets?

Help companies obtain financial resources required to meet payrolls, invest in new facilities, develop new products and compete effectively in global markets

What do depository institutions do?

Obtain funds by accepting checking and savings deposits and lending funds to borrowers

What are the types of depository institutions?

Commercial banks, credit unions, and savings and loan associations

What are some of the laws governing finance?

The Federal Reserve act, the Banking Act, the Securities Act, the Securities exchange act, the Financial services modernization act, the Sarbanes-Oxley Act, and the Dodd-Frank Act

How did the Federal Reserve act effect finance?

Centralized monetary policy, regulated the banking system, and created more flexible currency

How did the Banking act effect finance?

Separated commercial and investment banking, regulated securities market, and strengthened banking regulation

How did the Securities act effect finance?

Required companies to register their securities offerings, prohibited fraud in securities offerings, and established liability for misleading statements

How did the Securities Exchange act effect finance?

New regulation of securities exchanges, new disclosure requirements for public companies, prohibitions on insider trading

How did the Financial Services Modernization act effect finance?

Creation of financial holding companies, streamlining of regulatory oversight, increased competition on the financial industry, and heightened focus on consumer protection

How did the Sarbanes-Oxley act effect finance?

Enhanced financial disclosure requirements, greater accountability for corporate executives, and strengthened auditing standards

How did the Dodd-Frank act effect finance?

Increased oversight of financial institutions, enhanced prudential regulation, and enhanced consumer protection

What are the basic rights of shareholders?

Voting rights, rights to dividends, capital gains (return on investment), preemptive rights, rights to residual claims on assets

What is marketing?

Organizational function and a set of processes for creating, communicating, and delivering value to customers, as well as managing customer relationships in ways that benefit the organization and its stakeholders

What is utility?

The ability of goods and services to satisfy wants

What are the different types of utility?

Form, time, place, and ownership

What are the aspects of the scope of marketing?

People, places, events, and ideas

What is customer relationship management?

The ongoing process of acquiring, maintaining, and growing profitable customer relationships by delivering unmatched value

What is customer satisfaction?

Customers’ perception that a good or service delivers value above and beyond their expectations

What is customer loyalty?

Customers repeatedly buy certain products.

What is a marketing plan?

A formal document that defines marketing objectives and the specific strategies for achieving those objectives

What does a marketing plan involve?

Where to target efforts, determining strategies to reach the market, anticipating and responding to changes in the external envirionment

What is a target market?

A group of people who are most likely to buy a particular product

What needs to be considered when determining a target market?

Size, profitability, accessibility and competition

What is the marketing mix?

Product, Price, Place, Promotion

What impacts consumer decision making?

Cultural, social, personal, psychological.

What is consumer behavior?

People's actions when they are buying, using, and discarding goods and services for their personal consumption

What is marketing research?

Process of gathering, interpreting, and applying information to uncover opportunities and challenges and to make better decisions

What are the types of marketing research and data?

Primary and secondary

What are some examples of primary research?

Observation & Study

What is a product?

Anything that an organization offers to satisfy consumer needs and wants including both goods and services

What are the types of products?

Pure goods, pure services, consumer products, business products

What are pure goods?

Products that do not include any services

What are pure services?

Products that do not include any goods

What are consumer products?

Products purchased for consumer use or consumption

What are business products?

Products purchased to use either directly or indirectly in the production of other products

What is product differentiation?

The attributes that make a good or service different from other products that compete to meet the same or similar costumer needs

What is product line?

A group of products that are closely related to each other, either in terms of how they work or the customers they serve

What is product mix?

The total number of product lines and individual items sold by a single firm

What is branding?

A product’s identity\-- including product name, symbol, design, reputation, and image\-- that sets it apart from other players in the same category.

What is promotion?

Marketing communication designed to influence consumer purchase decisions through information, persuasion, and reminders

What is integrated marketing communication?

The coordination of marketing messages through every promotional vehicle to communicate a unified impression about a product

What are promotional channels?

Specific marketing communication vehicles, including traditional and newer tools.

What is product placement?

The paid integration of branded products into movies, television, and other media.

What is advergaming?

Video games created as a marketing tool, usually with brand awareness as a core goal

What is buzz marketing?

The active stimulation of word of mouth via unconventional, and often relatively low-cost tactics

What is a feature?

Describes what a product or service does, sets it apart from the competition