| Term | Definition |
|---|
| Divisions | Operation Units within a business |
| Decentralization | Dividing a business into divisions and delegating responsibilities |
| Responsibility Accounting | Assigning control of business revenues, costs, and expenses as a responsibility of a specific manager |
| Cost Center | Manager has authority to control costs |
| Profit Center | Manager has authority to make decisions about costs and revenues (thus profit) report using divisional income statements) |
| Controllable Expenses | Expenses that can be controlled by profit center managers |
| Rate of Return on Investments (ROI) | Income from operations divided by invested assets |
| Profit Margin | Income from operations divided by sales |
| Investment turnover | Sales divided by Invested assets |
| Par | The value assigned to a piece of stock |
| Common Stock | Each share of stock has equal rights |
| Preferred stock | A stock with different rights than common stocks, often preference to dividends |
| Premium | When a stock is sold above its par value, it is sold for a.... |
| Discount | When a stock is sold below its par value is is sold for a.... |
| Treasury Stock | Stock bought by its own corporation for later uses as employee benefits or something |
| Temporary Differences | Differences in income and taxable income, often caused by differences in when things are reported, but always catch up |
| Fixed Asset Impairments | Wehn fair value of a fixed asset falls below its book value, can happen due to market changes, losses due to using fixed assets, changes in law |
| Restructuring Charges | Costs incurred from actions such as canceling contracts or laying of employees, one time cost for future savings |
| Discontinued Operations | Gain or loss incurred from disposing a segment of a business |
| Extraordinary Items | Gains of losses from events that are significantly different from usual operations and occur infrequently (natural disasters, etc.) |
| Comprehensive Income | All changes in stockholders' equity during a period except those resulting from dividends and stockholder's investments |
| Other Comprehensive Income Items | Include foreign currency items, pension liabilities, and unrealized gains and losses on investments. |
| Equity Securities | Stocks in another corporation that a business buys, for short term or long term investments |
| Trading Securities | Securities that management intends to actively trade for profit. |
| Avaliable-for-sale Securities | Securities that management expects to sell in the future, but are not actively traded for profit |
| Unrealized Holding Gain of Loss | Difference between price securities were bought and their fair market value |
| Investment | Section in the balance sheet that reports long term investments |
| Business Combination | When a business acquires a controlling portion in another company, combined the two businesses |
| Parent Company | A corporation that owns a majority of the voting stock of another corporation |
| Subsidiary Company | The corporation that is controlled by a parent company |
| Consolidated Financial Statements | The combined financial statements of a parent and subsidiary company in one set of statements |
| Corporations | Separate identity that exist outside their owner. Can acquire, own, and distribute property in its own name |
| Retained Earnings Statement- | Statement that details changes in retained earnings. Starts with beginning retained earnings, add net income, and subtract dividends |
| Restrictions | Some state may apply restrictions on the amount of retained earnings that can be used for dividends for legal reasons. |
| Prior Period Adjustments | If errors are found in the previous period’s accounting, they cannot be used when calculating the current periods income, so they must be detailed in the retained earning statement. |
| Permanent Differences | Differences between taxable income and actual income that will not change over time. |
| Price- Earnings Ratio (P/E ratio) | Market Price per share of stock divided by Earning per share. Used to measure value of a stock. A high P/E ratio is a growth stock, and a low ratio is a value stock |
| Defined Contribution Plan | A fixed amount of money is invested on the employee’s behalf during his working years |
| 401K | A defined contribution plan that automatically takes out money from an employee’s paycheck before income taxes and invests it in mutual funds, and 90% or employers match their employee’s contributions. |
| Pike Place Roast | A delicious medium roast brewed all day, everyday at Starbucks |
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