Accounting principles Flashcards
How do financial accounts help in gauging financil status?
Snapshot of company’s finances
Details assets, liabilities, income, expenses
Aids in decision-making, performance evaluation (profitability, liquidity, solvency, and overall financial health)
Ensures regulatory compliance
What are the indicators of a company facing insolvency from the accounts?
Declining profitability
Cash flow problems
Increasing debt levels
Inability to meet financial obligations
Declining asset values
Why might CFF overspend/underspend indicate financial difficulty?
Reduced activity or delays
Lack of cash to pay suppliers/subcontractors
What an an ‘overhead’?
Overhead refers to ongoing business expenses not directly tied to specific projects or products, such as rent or administrative costs.
What is ‘escrow’?
An escrow account holds funds temporarily until a transaction is completed, ensuring security and compliance with agreed terms.
What is Capex/Opex?
Capex, or capital expenditure, refers to investments in long-term assets like equipment or property.
Opex, or operational expenditure, covers day-to-day costs like wages and utilities.
