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Unit 5


Accounting Equation Assets=Liabilities+Capital
Accounts payable money owed for credit purchases
accounts recievable the amount owed by customers
Assets things owned, such as cash and building
balance sheet a financial statement that lists the assets, liabilities, and capital of a business
Bank an institution that accepts demand deposits and maked commerical loans
Bond A liner-term written promise to pay a definite sum of money at a specified time
Bonding Provides payment of damages to people who have losses resulting from the negligence or dishonesty of an employee or from the failure of the business to complete a contract.
Book value the value of a share of stoch that is found by dividing the net worth (assets minus liabilities) of the corporation by the total number of shares outstanding
Budget a financial plan extending usually for one year
Capacity earning power
Capital what a business is worth after subtracting liabilities from assets
Certificate of Deposit (CD) a savings account that requires an investor to deposit a specified sum for a fixed period at a fixed interest rate
CHaracter an indication of one's moral obligation to pay debts
Check a written order on a financial institution to pay previously deposited money to a third party on demand
collateral property a borrower pledges to assure repayment of a loan
Commercial loan a loan made to a business
Common stock ownership that gives holders the right to participate in managing the business by having voting privileges and by sharing in the profits (dividends) if there are any
Conditions factors related to the economy and other matters, such as the economic health of a community or nation and the extent of business competition that affects credit decisions
Direct Deposit allows business to electronically transfer employees' paychecks directly from the employee's bank account to employee's bank accounts
disability insurance offers payments to employees who are no longer able to work because of accidents or illnesses
Electronic fund transfer (EFT) transferring money by computer rather than by check
Endorsement the signature-usually on the back-that transfers a negotiable instrument
Equity Capital money invested in the business by its owner or owners
Financial statement reports that summarize financial data over a period of time
Health insurance provides protection against the expenses of heath care
income statement a financial document that reports total revenue and expenses for a specific period
initial public offering (IPO) the first time a company sells stock to the public
installment credit credit used when a customer makes a sizable purchase and agrees to make payments over an extended but fixed period of time
Insurance a risk management tool that limits financial loss from uncontrollable events in exchange for regular payments
investment companies an organization that specializes in the sale of a variety of stocks, bonds, and other securities
liabilities claims against assets or things owed; the debts of a business
liability insurance provides protection for risks involved in operating a business
life insurance provides money that is paid upon the death of the insured to a person or people identified in the insurance policy
malpractice insurance a typer of liability insurance that protects against financial loss arising from suits for negligence in providing professional services
Market Value the value at which stock is bought and sold on any given day
No-fault insurance each insurance company in required to pay the losses of its insured when an accident occurs, regardless of who might have been responsible for the loss
non-bank financial institution an institution that offers on demand deposits or commercial loans, but not both
Preferred stock ownership that gives holders preference over the common stockholders when distributing dividends or assets
prime rate the lowest rate of interest; the rate at which large banks loan large sums to the best-qualified borrowers
Promissory note an unconditional written promise to pay a certain sum of obey, at a particular time or on demand, tot he order of one who has obtained the note
Risk the uncertainty that a loss a loss may occur
Savings account an account that allows customers to mke deposits, earn interest, and make withdrawals at any time without financial penalties
secured loan a loan that requires the borrower to pledge someting of value as security
securities stocks and bonds
smart card a credit and debit card with a memory that stores financial, health, credit, and other kinds of data that can be read by computers
stock a share of ownership in corporation
stockbroker a professional who buys and sells corporate securities for customers through a stock brokerage firm and gives investment advice
unsecured loan a loan that is not backed by collateral
Venture capitalist an investor or investment group that lends large sums of money to promising, new, or expanding small companies
working capital the difference between current assets and current liabilities