Test Bank for Accounting and Financial Management 100% Verified Questions and Rationales()

Test Bank for Accounting and Financial Management 100% Verified Questions and Rationales() Stock Market & its efficiencies - ANSWERSWhen the space shuttle exploded and they found the company responsible for it, the capital market found out within minutes As a result, this caused an immediate drop of the market share, showing that stock markets are extremely efficient Accountants vs Finance Professionals - ANSWERSAccountants - measure, analyze and manage performance - they look back in time to understand how we progress in our business plan (make decisions based on info of the past) - they give feedback to management Finance Professionals - they look towards the future - they forecast the future to understand how businesses are going to perform and they optimize choices accoridngly - make decisions as whether they should buy or sell a share Audit - ANSWERSthe examination og a company's financial statements and the accounting practices that produced them make sure statements are in conformity with GAAPs (generally accepted account principles) Management accounting - ANSWERS- Users INSIDE the organization - produce internal management reports that provide financial information on which decisions can be based for the future Financial accounting - ANSWERS- users OUTSIDE the organization (NGO's, government, shareholders) - information that is primarily for external purposes (e.g. shareholders) managerial vs financial accounting - ANSWERSmanagerial: provides managers and employees with the info needed to make decisions about a firm's financing, investing, marketing and operating activities (reflecting the past to determine the future) financial: generates financial statements and reports for interested people outside the organization. info is used to determine if the firm has reached their goals other types of accoutning - ANSWERScost accounting (cost of producing certain goods/services) government accounting not-for-profit accoutning tax accounting (generates tax strategy) Who is involved in financing and accounting? LIST - ANSWERSCORPORATE FINANCE - TREASURER (Finance & Internal) FINANCIAL MARKETS - ANALYST/PORTFOLIO MANAGER (Finance & External) MANAGEMENT ACCOUNTING - FINANCE MANAGER/CONTROLLER (Accountant & Internal) FINANCIAL ACCOUNTING - AUDITOR (Accountant & External) CORPORATE FINANCE - TREASURER (Finance & Internal) - ANSWERS- manages the provision of money to be able to achieve corporate goals in the upcoming years - dealing with money form shareholder or debt-holder - handling a financial risk - reporting to the CEO - responsible for everything that has to do with finance FINANCIAL MARKETS - ANALYST/PORTFOLIO MANAGER (Finance & External) - ANSWERS2 types of analysts: - BUY-SIDE analysts (usually works for a pension fund or mutual fund company) - SELL-SIDE analysts (works for a brokerage or firm that manages individual accounts and makes recommendations to the clients of the firm) Portfolio manager: decides whether to buy from stock X or stock Y MANAGEMENT ACCOUNTING - FINANCE MANAGER/CONTROLLER (Accountant & Internal) - ANSWERS- providing monthly financial statements and explain how they should be analysed - decision about what kind of actions should be taken to make sure to be on the right track for investment FINANCIAL ACCOUNTING - AUDITOR (Accountant & External) - ANSWERS- giving a public opinion whether a certain financial statement gives a true or fair view, also stating whether its possible to rely on certain numbers Primary statements - ANSWERSThese are statements in a set of annual accounts - shows how the business has performed over the past years - includes balance sheet, income statement and cash flow statement - the goals for next year Financial statements and their purpose - ANSWERSTool used to: - document the performance of a certain company - document the financial position of a certain company - hold management accountable for how a company is performing - determine how much money can be distributed to shareholders - make predictions - decide what to invest and divest - convinces BANKS to borrow money to a company - convinces SUPPLIERS to do business with a company Balance sheet & Income statement - ANSWERSbalance sheet: a snapshot that displays the financial position of a company at a specific day income statement: shows the profit and loss of a company over a certain time period assets - ANSWERScurrent assets - high liquidity; used in one year or less fixed assets - held for longer than 1 year; depreciation intangible assets - have value based on the rights or privileges they confer on a firm (usually long term assets such as patents. trademarks, brands) liabilities and equity - ANSWERScurrent liabilities - paid in one year or less long-term liabilities - paid after 1 year or more equity - the amount of assets minus the amount of liabilities COGS in P&L - ANSWERSBeginning inventory + net purchase - closing inventory gross profit = net sales - COGS Operating expenses - ANSWERSselling expenses + general expenses (all costs other than COGS) annual report - ANSWERSreport distributed to stockholders and other interested parties that describe's a firms operating activities and its financial conditions (can be semi-annually, quarterly, monthly) difference between cash flow statement and income statement - ANSWERS- in the cash flow, borrowing money and repaying loans are include - net cash flow is not affected by depreciation - profit is affected by depreciation in income statement A cash flow statement displays what comes in and goes out. It attributes sales to the period sold instead of the period in which the payment is actually recieve which is the case with an income statement cash flow statement and sources (inputs come from?) - ANSWERScash flow from... 1. operating systems - n1 source of revenue (selling goods and services) 2. investing activities (money invested in assets, equipment, land) 3. financing activities (loans, repayments) Financial Ratio analysis define & list - ANSWERStechnique which consists in computing rations that compare values of key accounts listed on a firm's financial statement Financial rations allow to compare performance between companies or between time 1. Profitability: measures the rate of return a firm is earning on various measurements of investment