Comm 1800 Financial terms Flashcards
managerial vs financial accounting
managerial: financial reports for internal use by company management
ex. sales reports, production costs, others
financial: financial statements used by investors, lenders, and other outside organizations
ex. balance sheet, income statement, cash flow statement
annual report key components and purpose
key comp: the 3 financial statements
purpose: describe a firm’s financial status (activities for the past year) and future prospects
accounting equation
assets - liabilities = owner’s equity or assets = liabilities + owner’s equity
assets
things of value owned by firm
tangible or intangible
liabilities (debts)
what a firm owes its creditors
owner’s equity
total amount invested into firm minus liabilities (net worth)
balance sheet
summarizes firm’s financial position at a specific point in time
current assets def
can/will be converted into cash within a year, provide quick funds to pay current bills
current assets examples
cash, accounts receivable, notes receivable, marketable securities, inventory
fixed assets def
used by firm for more than a year
fixed assets examples
land, buildings, equipment, machinery
these things depreciate every year which needs to be accounted for
intangible assets def
long term with no physical existence
intangible asset examples
patents, copyrights, trademarks, goodwill
current liabilities def
debts due within a year of balance sheet
current liabilities examples
accounts payable, notes receivable, income taxes payable, accrued expenses, current portion of long term debt due
long term liabilites
due more than a year after balance sheet
ex. bank loans, building mortgages, bonds issued
owner’s equity
owner’s total investment after liabilities are paid
retained earnings
amounts left over after profitable operations since firm’s beginning
total profits minus all dividends paid to stockholders
reinvested into firm, no underwriting costs
income statement def
summarizes firm’s revenues, expenses, and shows total profit or loss over a period of time
revenues
dollar amount of sales plus other income (interest, dividends, rents)
gross sales
total dollar amount of sales
net sales
total dollar amount of sales after deducting sales discounts/returns and allowances
cost of goods sold
total expense of buying/producing firm’s goods/services
production cost: raw material purchase, labor, factory overhead (utilities), maintenance, machinery repair
gross profit
amount a company earns after paying to produce products before deducting operating expenses
gross profit = net sales - cogs
