Financial Flashcards
ACCOUNTS RECEIVABLE
The money due to the firm for its delivered services but not yet paid by clients.
AGED ACCOUNTS RECEIVABLE
A report that shows a company’s accounts receivable according to how long an invoice has been outstanding (typically in 30 day segments).
BACKLOG
The list of current projects that will carry over to the following year, as well as the dollar value of anticipated revenues from projects contracted but as yet unearned.
BREAK-EVEN RATE
Measures the total cost of operations for each dollar spent on direct labor.
Rate*hourly Rate(salary) is the amount to bill to the projects.
Formula: (overhead rate + 1.0; which represents the unit cost of salaries)
CURRENT ASSETS
Cash and other resources that are reasonably expected to be realized in cash or sold/consumed in the business within one year of the balance sheet date or the firm’s operating cycle, whichever is longer.
CURRENT EARNINGS
The difference between all revenues and expenses on the income statement for the current year (after distributions and taxes have been deducted).
CURRENT LIABILITIES
a debt that can be reasonably expected to be paid from existing current assets or the creation of other current liabilities within one year or the operating cycle.
DIRECT EXPENSES
Project-related expenses that are not reimbursable and project-related expenses included in all lump sum fee contracts.
DIRECT LABOR
wages or salaries billable to a specific project and client.
EQUITY
The amount of money invested by the owner in the business minus any money taken out by the owner of the business.
INDIRECT EXPENSES
General and administrative non-project related expenses.
INDIRECT LABOR
wages that are not billable to a specific project.
LEVERAGE
measures a firm’s ability to manage debt effectively.
LIQUIDITY (QUICK RATIO OR CURRENT RATIO)
measures a firm’s ability to pay obligations that are expected to become due within the next year
LONG-TERM LIABILITIES
obligations expected to be paid after one year or an operating cycle, whichever is longer.
NET MULTIPLIER
Shows the revenue generated by the firm expressed as a percentage (or multiple) of total direct labor.
(AHPP pg.410 : net operating revenue is the net dollars remaining after deducting the invoiced consultant’s fees and expenses, and all reimbursable and non-reimbursable project-related expenses.)
Formula: (net operating revenue / total direct labor)
NET OPERATING REVENUE
Net revenue after deducting consultant fees and expenses, all reimburable and non-reimbursable project expenses.
NET PROFIT
(Also referred to as Net Income) The excess of revenues over expenses and is a key indicator of profitability.
NET REVENUE PER EMPLOYEE
Measures roughly how much money each employee generates for the firm.
OVERHEAD RATE
Measures the cost of operations not directly billable to a project.
(To express as a percentage of direct labor, multiply result by 100. The expense is non-project related. HR, Marketing, utility, rent, etc. are overhead)
Formula: (total indirect expenses / total direct labor)
PROFIT-TO-EARNINGS RATIO
Measures the firm’s effectiveness in generating profit.
Formula: (net profit (profit before distributions and taxes) / net operating revenue)
RETURN ON EQUITY
measures the profitability from the stockholders’ viewpoint (Net Income / Avg. Stockholders’ Equity)
RETURN ON OVERHEAD (ROOH)
A method used to calculate firm sales and profit goals.
REVENUE FACTOR
Used to check the balance between revenue and labor, and shows how well a firm is generating revenue from its total labor investment.
