Financial Accounting Final Study Guide
Liabilities – Probable debts or obligations that result from past transactions Current Liabilities – Are due within one year of the balance sheet date Liquidity – The ability to pay current obligations
Working capital – Current assets minus current liabilities Accrued Liabilities – Expenses that have been incurred but have not been paid at the end of the accounting period Deferred Revenues – Revenues that have been collected but not yet earned, they are liabilities until the goods or services have been provided Contingent Liability – A potential liability that has arisen as the result of a past event; it is not an effective liability until some future event occurs Bonds – Publicly traded debt
Operating Lease – Does not meet any of the four criteria established by GAAP and does not cause the recording of an asset and liability Capital Lease – Meets at least one of the four criteria established by GAAP and results in the recording of an asset and liability Present Value – The current value of an amount to be received in the future; a future amount discounted for compound interest Annuity – A series of periodic cash receipts or payments that are equal in amount each interest period Bond Principal – The amount payable at the maturity of the bond and on which the periodic cash interest payments are computed Par value/Face amount – Another name for bond principal, or the maturity amount of a bond Stated rate- The rate of cash interest per period stated in the bond contract Debenture – An unsecured bond; no assets are specifically pledged to guarantee repayment Callable bond – may be converted to other securities of the issuer Convertible bond – May be converted to other securities of the issuer (usually common stock) Indenture – A bond contract that specifies the legal provisions of a bond issue Secured bond – Specific assets are pledged as a guarantee of repayment at maturity Bond certificate – The bond document that each bondholder receives Trustee – An independent party appointed to represent the boldholders Coupon rate (stated rate/contract rate) - Stated rate of interest on bonds Market Interest Rate (or yield/effective-interest rate) – The current rate of interest on a debt when incurred. Bond premium – The difference between the selling price and par when the bond is sold for more than par. Bond discount – The difference between the selling price and par when the bold is sold for less than par Authorized Number of Shares – The maximum number of shares of a corporation’s capital stock that can be issued Issued Shares – The total number of shares of stock that have been sold Outstanding Shares – The total number of shares of stock that are owned by stockholders on any particular date Common stock – Is the basic voting stock issued by a corporation Par value – Nominal value per share of capital stock specified in the charter; serves as the basis for legal capital Legal capital – The permanent amount of capital defined by state law that must remain invested in the business No-par value stock – Capital stock that has no par value specified in the corporate charter Stock Dividend – A distribution of additional shares of a corporation’s own stock Stock Split – An increase in the total number of authorized shares by a specified ratio; it does not decrease retained earnings Preferred Stock – Has specified rights over common stock
Current Dividend Preference – The feature of preferred stock that grants priority on preferred dividends over common dividends Cumulative Dividend Preference – The preferred stock feature that requires specified current dividends not paid in full to accumulate for every year in which they are not paid. Dividends in arrears – Dividends on cumulative preferred stock that have not been declared in prior years Cash flow from operating activities – Directly related to earnings from normal operations Cash flow from investing activities – Related to the acquisition or...
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