chapter 9 vocab Flashcards
Reports prepared to summarize the changes resulting from business transactions that occur during an accounting period.
financial statements
A report of the net income or net loss for a specific period; sometimes called a profit-and-loss statement or earnings statement. First financial statement completed
income statement
A financial statement that summarizes changes in the owner’s capital account as a result of business transactions during the period. second financial statement
statement of changes in owner’s equity
The financial statement that reports the final balances in all asset, liability, and owner’s equity permanent accounts on a specific date.
balance sheet
A financial statement that summarizes the cash receipts and cash payments resulting from business activities during a period.
statement of cash flows
The process of evaluating the relationship between various amounts in the financial statements.
ratio analysis
A ratio used to evaluate the earnings performance of a business during the
accounting period.
profitability ratio
A ratio that examines the portion of each sales dollar that represents profit; calculated by
dividing net income by sales
return on sales
Assets that are used up or
converted to cash during the
normal operating cycle of
the business. (a/r, cash, supplies/inventory)
current asset
Debts of the business that
must be paid within the next
accounting period (acc pay)
current liability
the amount by which current assets exceed current liabilities
working capital
A measure of the ability of a business to
pay its current debts as they become due
and to provide for an unexpected need for
cash
liquidity ratio
The relationship between current assets (cash, receivables, and supplies/inventory) and
current liabilities (acc pay); calculated by dividing current
assets by current liabilities.
current ratio
A measure of the relationship between short-term
assets (cash and rec ONLY) and current liabilities; calculated by
dividing the total cash and receivables by the
current liabilities.
quick ratio
assets that can be quickly converted to cash
short term assets
