Chapter 8: Accounting and Financial Information Flashcards
Accounting Equation
The relationship among assets, liabilities, and owners equity. Expressed as Assets = Liabilities + Owner’s Equity.
Accounting
The recording, classifying, measuring, and interpreting of financial transactions and events to provide management with information for decision-making.
Activity Ratios’
A class of ratios that measure how well managers are creating value from organizational assets.
Assets
Resources or items of value owned or controlled by an organization.
Auditing
A type of accounting that involves reviewing and evaluating the financial information that is used to prepare an organization’s financial statements.
Balance Sheet
Financial report that shows a snapshot of an organizations cumulative financial condition as of a specific date.
Book Value
The cost of an asset less any accumulated depreciation.
Bookkeeping
The routine, daily categorization and recording of financial transactions.
Breakeven Analysis
The unit volume at which gross sales equal total expenditures.
Budget
Internal financial plan to forecast income and expenses over a set period of time.
Cash Ratio
Ratio that measures whether an organization can pay its short-term debts with cash and marketable securities only. It is calculated by dividing cash and cash equivalents by current liabilities.
Cost of Goods Sold (CGS)
The costs expended to buy or produce a produce or service.
Current Assets
Short term assets that can be converted to cash within a year.
Current Liabilities
Financial obligations with repayment terms less than one year.
Current Ratio
Liquidity ratio that measures whether an organization has the resources available to meet its short term debt. Calculated by dividing current assets by current liabilities.
