Finance Vocab

Question 1

Cost of Goods Sold

Answer 1

This line on an income statement shows the cost of raw materials and labor to produce a finished product or service that is available to a consumer

Question 2

Financial Institutions

Answer 2

Organizations that are public or private whom act as a channel between savers and borrowers of funds. There are two types of institutions: depository and non-depository. Depository organizations are usually banks or credit unions. Non-depository organizations are often recognized as insurance companies or mutual funds

Question 3

Financial Ratio

Answer 3

Financial ratios provide a comparison between financial statement items to determine the strength or weakness of a company. The most common ratios are: net sales to net worth and net income to net sales

Question 4

Sunk Cost

Answer 4

A cost that a business has incurred, but cannot recover

Question 5

Client Services

Answer 5

Any activity provided by a vendor on behalf of a client. Depending on the business this can include customer service, financial management, information technology, social media support, database management, etc. The services provided to a client are agreed on by both parties and detailed in a contract unless otherwise specified.

Question 6

Financial goal

Answer 6

Monetary objectives of an individual, business or other organization that are decided by future needs of those entities.

Question 7

Estate tax

Answer 7

A tax paid on wealth, collected after a person has died

Question 8

Consolidation

Answer 8

Combining assets, equity, liabilities and operating accounts of a business and its subsidiaries into one financial statement OR combining two or more businesses through the purchase, merger or ownership transfer to create a new business

Question 9

Debtor

Answer 9

A person or business that owes money, goods or services to another.

Question 10

Classification

Answer 10

A data-mining technique that uses a decision tree that requires a series of decisions

Question 11

Data mining

Answer 11

the practice of analyzing large databases in order to generate new information.

Question 12

Internal Audit

Answer 12

An examination of an organization’s financial statements that is conducted by an employee of the organization

Question 13

Equity

Answer 13

Includes earnings that a company has retained and the amount of funds invested in that company by its owners

Question 14

Marginal Analysis

Answer 14

A decision making tool that compares the cost of an activity versus the benefits of the activity

Question 15

Exchange rate

Answer 15

The value of one currency in terms of another, established on the foreign exchange market

Question 16

Tax

Answer 16

Payment made to the government for services they provide.

Question 17

Managerial accounting

Answer 17

Accounting that focuses on revenues and expenses of a business, reporting variances to management.

Question 18

Convergence

Answer 18

The joining of two or more unique factors or phenomena, such as technologies. For example, the development of a smartphone was the convergence of telecommunications and internet technologies

Question 19

Solvency

Answer 19

Refers to the ability of an organization to meet its financial obligations.

Question 20

Inventory management

Answer 20

The process of buying and storing materials and products while controlling costs