Business and Finance Summary
A duty of care - ANSWER Obligation to consider how our actions impact each other
Absolute advantage - ANSWER Ability to produce more of a good with the same resources
Accounting - ANSWER Provides insight into the financial state of organizations
Accounting cycle - ANSWER Consists of 9 main activities (Analyze business transactions,
journal entries, posting to the ledger accounts, trial balance, adjusting entries, adjusted trial balance,
financial statements, closing entries, post-closing trial balance)
Accrual-based accounting - ANSWER Revenues and expenses recorded when they occur
Administrative Law - ANSWER Laws made by government agencies
Affinity fraud - ANSWER Targeting certain groups based on race, gender, etc.
Assets - ANSWER Anything with monetary value a business owns
Authoritative GAAP - ANSWER Binding guidelines that companies must follow
Balance sheet - ANSWER Snapshot of a company's overall financial position
Benchmarking - ANSWER Comparing performance to average performance/standard
performance
Benford's law - ANSWER Observation about patterns in the leading digit of numerical data
Bilateral contract - ANSWER Contract in which both parties do something
Board independence (in auditing firms) - ANSWER CEO and chairperson should be held by
different people
Breach of Condition - ANSWER Breach of a major term in a contract
Breach of Warranty - ANSWER Breach of a minor term in a contract
Brick and Mortar companies - ANSWER Companies that have a physical location
Capital - ANSWER Anything that gives value or benefit to its owners
Cash flow statement - ANSWER Reveals inflows and outflows of cash from operating,
investing, and financing activities
Cash-based accounting - ANSWER Sales and expenses recorded when money is exchanged
in cash
Civil law - ANSWER System of law based on the Napoleonic Code, covers things like
trademarks
Collateral - ANSWER Asset that guarantees a loan
Command economy - ANSWER Economic system controlled by the government (they
determine how much to produce)
Commercial loan - ANSWER Loan for a business
, Business and Finance Summary
Common law - ANSWER System of law where decisions are made by looking at precedent
cases
Comparative advantage - ANSWER Ability to produce a good at a lower opportunity cost
Compliance audit - ANSWER Review of an organization's adherence to regulatory guidelines
Constitutional Law - ANSWER Backbone of the legal system, no current law can contradict
the constitution
Contract key elements - ANSWER Offer, acceptance, awareness, consideration, capacity,
legality
Copyright - ANSWER Protection for artistic or creative works
Corporate governance - ANSWER Ensures that a company is run fairly and properly
Credit history - ANSWER Debtor's past credit activity
Credit risk - ANSWER Possibility that a business's debtor is unable/unwilling to pay back
loans
Creditworthiness - ANSWER Likelihood that a debtor will pay back their loans
Debit and credit - ANSWER Debit is putting in cash, credit is taking out cash
Defamation criteria - ANSWER Truth, fair comment, absolute privilege, qualified privilege
Defaulted - ANSWER Act of not paying off a loan
Delinquent - ANSWER Act of being late on a loan
Differential cost - ANSWER Price difference between two alternatives
Direct cost - ANSWER Cost associated with the production of a good or service
Dividends - ANSWER Monetary funds paid to shareholders from earnings after tax
Drawings - ANSWER Monetary funds withdrawn from business for personal use
Economic risk - ANSWER Risk of loss associated with economic issues
Economics - ANSWER Study of consumption and resource allocation decisions - involves
analyzing why to choose to do something over something else
Embezzlement - ANSWER When an employee takes possession of money/resources illegally
EPA - ANSWER Environmental Protection Agency, sets environmental standards
Equilibrium point - ANSWER Point of intersection between supply and demand
Excise tax - ANSWER Tax on the production, sale, or consumption of SOMETHING HARMFUL
TO THE ENVIRONMENT
FDA - ANSWER Food and Drug Administration, approves medicines and sets food standards
A duty of care - ANSWER Obligation to consider how our actions impact each other
Absolute advantage - ANSWER Ability to produce more of a good with the same resources
Accounting - ANSWER Provides insight into the financial state of organizations
Accounting cycle - ANSWER Consists of 9 main activities (Analyze business transactions,
journal entries, posting to the ledger accounts, trial balance, adjusting entries, adjusted trial balance,
financial statements, closing entries, post-closing trial balance)
Accrual-based accounting - ANSWER Revenues and expenses recorded when they occur
Administrative Law - ANSWER Laws made by government agencies
Affinity fraud - ANSWER Targeting certain groups based on race, gender, etc.
Assets - ANSWER Anything with monetary value a business owns
Authoritative GAAP - ANSWER Binding guidelines that companies must follow
Balance sheet - ANSWER Snapshot of a company's overall financial position
Benchmarking - ANSWER Comparing performance to average performance/standard
performance
Benford's law - ANSWER Observation about patterns in the leading digit of numerical data
Bilateral contract - ANSWER Contract in which both parties do something
Board independence (in auditing firms) - ANSWER CEO and chairperson should be held by
different people
Breach of Condition - ANSWER Breach of a major term in a contract
Breach of Warranty - ANSWER Breach of a minor term in a contract
Brick and Mortar companies - ANSWER Companies that have a physical location
Capital - ANSWER Anything that gives value or benefit to its owners
Cash flow statement - ANSWER Reveals inflows and outflows of cash from operating,
investing, and financing activities
Cash-based accounting - ANSWER Sales and expenses recorded when money is exchanged
in cash
Civil law - ANSWER System of law based on the Napoleonic Code, covers things like
trademarks
Collateral - ANSWER Asset that guarantees a loan
Command economy - ANSWER Economic system controlled by the government (they
determine how much to produce)
Commercial loan - ANSWER Loan for a business
, Business and Finance Summary
Common law - ANSWER System of law where decisions are made by looking at precedent
cases
Comparative advantage - ANSWER Ability to produce a good at a lower opportunity cost
Compliance audit - ANSWER Review of an organization's adherence to regulatory guidelines
Constitutional Law - ANSWER Backbone of the legal system, no current law can contradict
the constitution
Contract key elements - ANSWER Offer, acceptance, awareness, consideration, capacity,
legality
Copyright - ANSWER Protection for artistic or creative works
Corporate governance - ANSWER Ensures that a company is run fairly and properly
Credit history - ANSWER Debtor's past credit activity
Credit risk - ANSWER Possibility that a business's debtor is unable/unwilling to pay back
loans
Creditworthiness - ANSWER Likelihood that a debtor will pay back their loans
Debit and credit - ANSWER Debit is putting in cash, credit is taking out cash
Defamation criteria - ANSWER Truth, fair comment, absolute privilege, qualified privilege
Defaulted - ANSWER Act of not paying off a loan
Delinquent - ANSWER Act of being late on a loan
Differential cost - ANSWER Price difference between two alternatives
Direct cost - ANSWER Cost associated with the production of a good or service
Dividends - ANSWER Monetary funds paid to shareholders from earnings after tax
Drawings - ANSWER Monetary funds withdrawn from business for personal use
Economic risk - ANSWER Risk of loss associated with economic issues
Economics - ANSWER Study of consumption and resource allocation decisions - involves
analyzing why to choose to do something over something else
Embezzlement - ANSWER When an employee takes possession of money/resources illegally
EPA - ANSWER Environmental Protection Agency, sets environmental standards
Equilibrium point - ANSWER Point of intersection between supply and demand
Excise tax - ANSWER Tax on the production, sale, or consumption of SOMETHING HARMFUL
TO THE ENVIRONMENT
FDA - ANSWER Food and Drug Administration, approves medicines and sets food standards
