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109 Cards in this Set
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economics
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study of how society chooses to employ resources to produce goods and services and distribute them for consumption
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microeconomics
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looks at behavior of people and organizations in particular markets
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macroeconomics
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looks at the operation of a nation's economy as a whole
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resource development
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study of how to increase resources and to create the conditions that will make better use of them
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invisible hand
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coined by adam smith to describe the process that turns self directed gain into social and economic benefits for all
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capitalism
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economic system in which all factors of productions and distribution are privately owned and operated for profit
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supply
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quantity of products that manufacturers or owners are willing to sell at different prices at a specific time
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demand
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quantity that people are wiling to buy at different prices at a specific time
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market price
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price determined by supply and demand
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perfect competition
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degree of competition in which there are many sellers in a market and none is large enough to dictate the price of a product
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monopolistic competition
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degree of comp. in which a large number of sellers produce very similar products that buyers nevertheless perceive as different
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oligopoly
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a degree of comp. in which just a few sellers dominate the market
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monopoly
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degree of comp. in which only one seller controls the total supply of a product or service and sets the price
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socialism
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economic system based on the premise that some/most basic businesses should be owned by the government so that profits can be more evenly distributed among the people
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brain drain
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loss of the best and brightest people to other countries
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communism
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economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production
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free-market economics
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economic systems in which the market largely determines what goods and services get produced, who gets them, and how the economy grows
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command economics
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economi systems in which the government largely decides what goods and services get produced, who gets them, and how the economy grows
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mixed economies
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economic systems in which some allocation of resources is made by the market and some by the government
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gross domestic profit
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total value of final goods and services produced in a country in a given year
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unemployment rate
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number of civilians at least 16 years old who are unemployed and tried to find a job within the prior four weeks
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inflation
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general rise in the prices of goods and services over time
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disinflation
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situation in which price increases are slowing (infl. rate is declining)
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deflation
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situation in which prices are declining
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stagflation
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situation when the economy is slowing but prices are going up anyway
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consumer price index
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monthly statistics that measure the pace of inflation or deflation
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producer price index
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index that measures prices at the wholesale level
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business cycles
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periodic rises and falls that occur in economies over time
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recession
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two or more consecutive quarters of decline in GDP
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depression
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severe recession, usually accompanied by deflation
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fiscal policy
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federal government's efforts to keep the economy stable by increasing or decreasing taxes or government spending
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national debt
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the sum of government deficits over time
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keynesian economic theory
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theory that a government policy of increasing spending and cutting taxes could stimulate the economy in a recession
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monetary policy
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the management of the money supply and interest rates by the federal reserve
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accounting
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recording, classifying, summarizing, and interpreting of financial events and transactions to provide management and other interested parties the information they need to make good decisions
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managerial accounting
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accounting used to provide information and analyses to managers inside the organization to assist them in decision making
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certified management accountant
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professional accountant who has met certain educational and experience requirements, passed a qualifying exam, and been certified by the institute of certified management accountants
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financial accounting
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accounting information and analyses prepared for people outside the organization
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annual report
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yearly statement of the financial condition, progress, and expectations of and organization
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private accountant
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accountant who works for a single firm, government agency, or nonprofit organization
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public accountant
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accountant who provides accounting services to individuals or businesses on a fee basis
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certified public accountant
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accountant who passes a series of examinations established by the american institute of certifies public accountants
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auditing
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job of reviewing and evaluating the information used to prepare a company's financial statements
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independent audit
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evaluation and unbiased opinion about the accuracy of a company's financial statements
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certified internal auditor
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an accountant who hasa bachelor's degree and two years of experience internal auditing, and who has passed an exam administered by the institute of internal auditors
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tax accountant
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accountant trained in tax law and responsible for preparing tax returns or developing tax strategies
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government and not-for-profit accounting
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accounting system for organizations whose purpose is not generating a profit but serving ratepayers, taxpayers, and others according to a duly approved budget
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accounting cycle
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six step procedure that results in the preparation and analysis of the major financial statements
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bookkeeping
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the recording of business transactions
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journal
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the record book or computer program where accounting date are first entered
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double-entry bookkeeping
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practice of writing every business transaction in two places
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ledger
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specialized accounting book or computer program in which information from accounting journals is accumulated into specific categories and posted so that managers can find all the information about one account in the same place
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trial balance
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summery of all the financial data in the account ledgers that ensures the figures are correct and balanced
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financial statement
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summary of all transactions that have occurred over a particular period
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financial accounting equation
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assets=liabilities + owners equity - basis for balance sheet
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balance sheet
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financial statement that reports a firms financial condition at a specific time and is composed of three major accounts: assets, liabilities, and owner's equity
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assets
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economic resources owned by a firm
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liquidity
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the ease with which an asset can be converted into cash
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current assets
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items that can or will be converted into cash within one year
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fixed assets
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assets that are relatively permanent, such as land, buildings, and equipment
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intangible assets
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long-term assets (patents, trademarks, copyrights) that have no real physical form but do have value
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liabilities
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what the business owes to others (debts)
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accounts payable
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current liabilities are bills the company owes to other for merchandise or services purchased on credit but not yet paid for
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notes payable
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short-term or long-term liabilities that a business promises to repay by a certain date
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bonds payable
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long-term liabilities that represent money lent to the firm that must be paid back
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owners' equity
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amount of the business that belongs to the owners minus any liabilities owed by the business
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retained earnings
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accumulated earnings from a firm's profitable operations that were reinvested in the business and not paid out to stockholders in dividends
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income statement
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financial statement that shows a firm's profit after costs, expenses, and taxes; it summarizes all of the resources that have come into the firm (revenue), all the resources that have left the firm (expenses), and resulting net income or net loss
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net income or net loss
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revenue left over after all costs and expenses, including taxes, are paid
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cost of goods sold/manufactured
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measure of the cost of merchandise sold or cost of raw materials and supplies used for producing items for resale
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gross profit margin
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how much a firm earned by buying or making and selling merchandise
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operating expenses
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costs involved in operating a business, such ascent, utilities, and salaries
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depreciation
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the systematic write-off of the cost of a tangible asset over its estimated useful life
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statement of cash flows
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financial statement that reports cash receipts and disbursements related to a firm's three major activities: operations, investments, and financing
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cash flow
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the difference between cad coming in and cash going out of a business
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ratio analysis
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assessment of a firm's financial condition using calculations and interpretations of financial ratios developed from the firm's financial statements
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finance
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function in a business that acquires funds for the firm and manages those funds within the firm
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financial management
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job of managing a firm's resources so it can meet it's goals and objectives
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financial managers
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managers who examine financial data prepared by accountants and recommend strategies for improving the financial performance of the firm
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short-term forecast
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forecast that predicts revenues, costs, and expenses for a period of one year or less
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cash flow forecast
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forecast that predicts the cash inflows and outflows in future period, usually months or quarters
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long-term forecast
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forecast that predicts revenues, costs, and expenses for a period longer than 1 year, and sometimes as far as 5 or 10 years
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budget
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financial plan that sets forth managements expectations and, on the basis of those expectations, allocates the use of specific resources throughout the firm
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capital budget
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budget that highlights a firm's spending plans for major asset purchases that often require large sums of money
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cash budget
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budget that estimates cash inflows and outflows during a particular period like a month or a quarter
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operating/master budget
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budget that ties together the firm's other budgets and summarizes its proposed financial activities
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financial control
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a process in which a firm periodically compares its actual revenue, costs, and expenses with its budget
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capital expenditures
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major investments in either tangible long-term assets such as land, buildings, and equipment or intangible assets such as patents, trademarks,and copyrights
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debt financing
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funds raised through various forms or borrowing that must be repaid
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equity financing
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money raised from within the firm, from operations or through the sale of ownership in the firm (stock or venture capital)
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sort-termfinancing
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funds needed for a year or less
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long-term financing
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funds needed for more than a year
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trade credit
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the practice of buying goods and services now and paying for them later
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promissory note
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written contract with a promise to pay a supplier a specific sum of money at a definite time
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secured loan
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a loan backed by collateral, something valuable such as property
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unsecured loan
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loan that doesn't require any collateral
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line of credit
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given amount of unsecured short-term funds a bank will lend to a business, provided the funds are readily available
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revolving credit agreement
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line of credit that's guaranteed but usually comes with a fee
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commercial finance companies
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organizations that make short-term loans to borrowers who offer tangible assets as collateral
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factoring
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process of selling accounts receivable for cash
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commercial paper
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unsecured promissory notes of $100,000 and up that mature in 270 days or less
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term-loan agreement
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promissory note that requires the borrower to repay the loan in specified installments
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risk/return trade-off
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principle that the greater the risk a lender takes in making a loan, the higher the interest rate required
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indenture terms
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terms of agreement in a bond issue
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secured bond
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bond issued with some form of collateral
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unsecured bond
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bond backed only by the reputation of the issuer; also called a debenture bond
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venture capital
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money that is invested in new or emerging companies that are perceived as having great profit potential
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leverage
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raising needed funds through borrowing to increase a firm's rate of return
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cost of capital
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the rate of return a company must earn in order to meet the demands of its lenders and expectations of its equity holders
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