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A303 Ch. 3
Definitions
| Term | Definition |
|---|---|
| Liquidity | period of time before an asset is converted to cash or until a liability is paid |
| Long-term solvency | the riskiness of a company with regard to the amount of liabilities in its capital structure |
| Operating cycle | period of time necessary to convert cash to raw materials, raw materials to finished product, the finished product to receivables, and then finally receivables back to cash |
| Cash equivalents | short-term, highly liquid investments that can be readily converted to cash with little risk of loss |
| Prepaid expense | represents an asset recorded when an expense is paid in advance, creating benefits beyond the current period |
| Accounts payable | obligations to suppliers of merchandise or of services purchases on open account |
| Paid-in capital | invested capital consisting primarily of amounts invested by shareholders when they purchase shares of stock from the corporation |
| Subsequent event | a significant development that takes place after the company's fiscal year-end but before the financial statements are issued |
| Related-party transactions | transactions with owners, management, families of owners or management, affiliated companies, and other parties that can significantly influence or be influenced by the company |
| Illegal acts | violations of the law, such as bribes, kickbacks, and illegal contributions to political candidates |
| Proxy statement | contains disclosures on compensation to directors and executives; sent to all shareholders each year |
| Vertical analysis | expression of each item in the financial statements as a percentage of an appropriate corresponding total, or base amount, but within the same year |
| Current ratio | current assets divided by current liabilities |
| Debt to equity ratio | compares resources provided by creditors with resources provided by owners |
| Financial leverage | by earning a return on borrowed funds that exceeds the cost of borrowing the funds, a company can provide its shareholders with a total return higher than it could achieve by employing equity funds alone |
Created by:
mpiontek
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