Term
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Definition
| refers to the procedures designed to ensure that the company is managed in the interests of the shareholders |
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Term
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| elected by the stockholders to represent their interests, is responsible for maintaining the integrity of the company's financial reports |
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Term
| Unqualified Audit Opinion |
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Definition
| (clean audit opinion) an auditor's statement that the financial statements are fair presentations in all material respects in conformity with GAAP |
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Definition
| predictions of earnings for future accounting periods |
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| managers of pension, mutual, endowment, and other funds that invest on the behalf of others |
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Definition
| include individuals who purchase shares in companies |
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| include suppliers and financial institutions that lend money to companies |
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Definition
| suggest that the benefits of accounting for and reporting information should outweigh the costs |
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Definition
| can influence a decision' it is timely and has predictive and/or feedback value |
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Term
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Definition
| is accurate, unbiased, and verifiable |
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Definition
| can be compared over time because similar accounting methods have been applied |
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Term
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Definition
| allows comparisons across businesses because similar accounting methods have been applied |
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Definition
| amounts that are large enough to influence a user's decision |
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Definition
| suggests that care should be taken not to overstate assets and revenues or understate liabilities and expenses |
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Term
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Definition
| a written public news announcement normally distributed to major news services |
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Term
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Definition
| the annual report that publicly traded companies must file with the SEC |
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Term
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Definition
| the quarterly report that publicly traded companies must file with the SEC |
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Term
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Definition
| used by publicly traded companies to disclose any material event not previously reported that is important to investors (e.g., auditor changes, mergers) |
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Term
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Definition
| a legal amount per share established by the board of directors; it establishes the minimum amount a stockholder must contribute and has no relationship to the market price of the stock |
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Term
| Additional Paid-In Capital |
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Definition
| (paid-in capital, contributed capital in excess of par) the amount of contributed capital less the par value of the stock |
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Term
| Gross Profit(Gross Margin) |
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Definition
| net sales less cost of goods sold |
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Term
| Income From Operations (Operating Income) |
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Definition
| equals net sales less cost of goods sold and other operating expenses |
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Term
| Income Before Income Taxes (Pretax Earnings) |
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Definition
| revenues minus all expenses except income tax expense |
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Term
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Definition
| result from the disposal of a major component of the business and are reported net of income tax effects |
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Term
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Definition
| gains and losses that are both unusual in nature and infrequent in occurrence; they are reported net of tax on the income statement |
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Term
| What are the responsibilities of management and independent auditors in the financial reporting process? |
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Definition
Management of the reporting company must decide on the appropriate format(categories) and level of detail to present in its financial reports
independent audits increase the credibility of the information |
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Term
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Definition
net income/average total assets
measures how much the firm earned for each dollar of investment |
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Term
| U.S. Securities and Exchange Commission (SEC) |
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Definition
| mission is to protect investors and maintain the integrity of the securities markets; oversees the work of the Financial Accounting Standards Board (FASB), the Public Company Accounting Oversight Board (PCAOB), and the stock exchanges |
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Term
| Chairman and Chief Executive Officer (CEO) |
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Definition
| the highest officer in the company |
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Term
| Chief Financial Officer (CFO) |
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Definition
| highest officer associated with the financial and accounting side of the business |
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Term
| The CEO and CFO of all public companies must personally certify that |
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Definition
1)each report filed with the SEC does not contain any untrue material statement or omit a material fact and fairly presents in all material respects the financial condition, results of operations, and cash flows of the company
2)there are no significant deficiencies and material weaknesses in the internal controls over financial reporting
3)they have disclosed to the auditors and audit committee of the board any weaknesses in internal controls or any fraud involving management or other employees who have a significant role in financial reporting |
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Term
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Definition
| a quick, unbiased reaction to information |
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Term
| Annual Reports normally include |
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Definition
1)four basic financial statements: income statement, balance sheet, stockholders' equity or retained earnings statement, and cash flow statement
2)Related notes (footnotes)
3)Report of Independent Accountants (Auditor's Opinion) if the statements are audited |
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Term
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Definition
| have no physical existence and a long life |
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Term
| Nonoperating (other) Items |
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Definition
| income, expenses, gains, and losses that do not relate to the company's primary operations |
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Term
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Definition
| discontinued operations and extraordinary items |
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Term
| Indirect Method of recording operating activities |
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Definition
| net income +/- adjustments for noncash items = cash provided by operating activities |
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Term
| Three types of information included in notes |
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Definition
1)Descriptions of the key accounting rules applied to the company's statements
2)Additional detail supporting reported numbers
3)Relevant financial information not disclosed on the statements |
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Term
| ROA profit driver analysis/ROA decomposition/DuPont analysis |
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Definition
| breaks down ROA into two factors 1)Net Profit Margin 2)Total Asset Turnover |
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Term
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Definition
| describe the two ways that management can improve ROA) |
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Term
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Definition
Net Income/Net Sales
measures how much of every sales dollar is profit |
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Term
| How Net Profit Margin can be increased |
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Definition
1)increasing sales volume
2)increasing sales price
3)decreasing cost of goods sold and operating expenses |
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Term
| How Total Asset Turnover (efficiency) can be increased |
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Definition
1)collecting accounts receivable more quickly
2)centralizing distribution to reduce inventory kept on hand
3)consolidating production facilities in fewer factories to reduce the amount of assets necessary to generate each dollar of sales |
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Term
| High Value/Product-differentiation Strategy |
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Definition
| companies rely on research and development and product promotion to convince customers of the superiority or distinctiveness of their products |
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Term
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Definition
| relies on efficient management of accounts receivable, inventory, and productive assets to produce high asset turnover |
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