CHOP 3.4 - Financial Management Flashcards
Definition
Accounts Payable
A record of accounts of money payable to consultants and other suppliers for expenses.
Definition
Accounts Receivable
A record of professional fees and disbursements which have been invoiced.
Definition
Aging Reports
A record of invoices due and past due. (For both receivable and payable)
Definition
Amortization
An accounting method for spreading out the costs for the use of a long-term asset over the expected period the long-term asset will provide value.
Definition
Average Collection Period (ACP)
Average collection period is the number of days it takes to receive payment for goods or services. It is measured by calculating the (Accounts Receivable) / (Gross revenue) X 365.
Definition
Bad Debt
Recorded on the income statement, The amount of accounts receivable that will not be collected from clients.
Definition
Balance Sheet
A record of all assets (bank funds, receivables, furniture…) all liabilities (accounts payable, loans…) and retained earnings which state the financial position of the practice.
Definition
Cash Book
A record of the day to day cash position of the practice using the accounting method.
Definition
Cash Flow
Cash and other liquid assets to meet current payroll, consultants fees and other overhead expenses.
Definition
Current Assets
Cash + Cash equivalent +Items that can be converted into cash.
Definition
Current Liabilities
Usually includes liabilities that are due within the year (accounts payable, taxes, wages, insurance…).
Definition
Current Ratio
The difference between current assets and current liabilities. It is measured by calculating the Current assets / Current Liabilities.
Definition
Debt to Equity Ratio
The debt-to-equity ratio shows how much of a company is owned by creditors (people it has borrowed money from) compared with how much shareholder equity is held by the company. The formula is total liabilities / shareholder equity.
Definition
Depreciation / Amortization
The rate by which capital assets may be depreciated according to government tax regulations with time.
Definition
Direct Personal Expense (Direct labor cost)
The salary of staff + the cost of such mandatory and customary contributions and employee benefits (employment tax, statutory benefits, insurance, sick leave, holidays, vacations, pensions…).
Definition
Disbursement Record
A record of billable reimbursable expenses.
Definition
Fiscal Period
A 12-month period for which financial records start and end.
Definition
General ledger
A record of all accounts, including receivables, payables, income and expenses, payroll, tax payments, disbursements…
Definition
Labor Multiplier (Net Multiplier)
The formula is net revenue / direct labor costs. It represents the actual net revenue generated by the firm expressed as a multiple of total direct labor costs. It shows the return on investment made in direct labor costs.
Definition
Multiplier
A % or figure by which direct personnel expense is multiplied to cover overhead expenses and profit (billing rate).
Definition
Office Overhead
Includes expenses for rent and utilities, office supplies, automobile expenses, promotion and advertising, books and subscriptions.
Definition
Overhead Rate
The formula is total overhead including indirect labor / direct labor costs. This is a key rate to measure efficiency. The lower the overhead rate, the higher the profit margin.
Definition
Payroll Burden
Includes required contributions by the employer (statutory benefits), including employment insurance, Canada pension plan / Quebec pension plan, health taxes, workers compensation.
Definition
Payroll Records
A record of salaries, taxes due and paid, and payroll burden for each employee.
