The following list of terms or phrases are discussed in this chapter.

1. Free cash flow 

2. Securities and Exchange Commission (SEC) 

3. Solvency 

4. Financial Accounting Standards Board (FASB) 

5. Materiality 

6. Cost constraint 

7. Faithful representation 

8. Liquidity 

9. Working capital 

10. Operating cycle 

11. Generally accepted accounting principles (GAAP) 

12. Current liabilities 

13. Relevance 

14. Verifiable 

Match each term or phrase to its description below. 

a.________Whether an item is large enough to likely influence the decision of an investor or creditor. 

b.________Constraint that weighs the cost that companies will incur to provide the information against the benefit that financial statement users will gain from having the information available. 

c.________Obligations that a company expects to pay within the next year or an operating cycle, whichever is longer. 

d.________Information that is complete, neutral, and free from error. 

e.________The primary accounting standard-setting body in the United States. 

f.________Net cash provided by operating activities after adjusting for capital expenditures and cash dividends paid. 

g.________A set of accounting standards that has substantial authoritative support and which guide accounting professionals. 

h.________The ability of a company to pay obligations that are expected to become due within the next year or operating cycle. 

i.________The average time required to purchase inventory, sell it on account, and then collect cash from customers—that is, go from cash to cash. 

j.________The quality of information that indicates the information makes a difference in a decision.

k.________The agency of the U.S. government that oversees U.S. financial markets and accounting standard-setting bodies. 

l.________The quality of information that occurs when independent observers, using the same methods, obtain similar results. 

m.________The difference between the amounts of current assets and current liabilities. 

n.________The ability of a company to pay interest as it comes due and to repay the balance of debt due at its maturity.