Glossary_Finance_Terms Flashcards
Accounts Receivable
Accounts receivable represents uncollected revenues the company expects to receive within one year. It is recorded as part of current assets on the balance sheet.
Accounts Payable
Accounts payable represents incurred expenses the company expects to pay within one year. It is recorded as part of current liabilities on the balance sheet.
Annual Report
A report published yearly by all publicly-held companies that details the financial condition of the company and includes the balance sheet, income statement, cash flow statement, and other relevant information.
Assets
The value of everything a company uses to conduct business, such as cash, equipment, land, inventories, office equipment, and money owed to the company by customers and clients.
Balance Sheet
A financial statement that gives a snapshot of a company’s financial situation at a particular point in time and lists its different assets, liabilities, and owners’ equity.
Capex
Capital expenditure or capital expense is the money an organization or corporate entity spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land.
Cash Flow Statement
A financial statement that records a company’s actual cash inflows and cash outflows over a defined period. It includes three sections: operating cash flow, investing cash flow, and financing cash flow.
Contributed Capital
Money invested in a company by its owners/shareholders. Reported as part of owners’ equity on the balance sheet.
Cost of Goods Sold
Also known as Cost of Sales, this represents all the expenses directly related to the making and storing of a company’s goods, such as raw materials, warehousing, and direct labor costs. Doesn’t exist for service companies.
Current Assets
Assets the company plans to convert to cash, sell, or use during the coming year, including cash, accounts receivable, and inventory on hand.
Current Liabilities
The flip side of current assets, this is money the company expects to pay within one year and includes accounts payable and short-term borrowings.
Depreciation
A method used to account for the diminishing value of an asset over the time it is used and to match profit with the expenses it took to generate that profit. Registered as a non-cash expense.
EBIT (Earnings Before Interest and Taxes)
Amount calculated by subtracting cost of goods sold and operating expenses from revenue on the income statement. Also called operating earnings.
Expenses
Different costs, such as cost of goods sold, operating expenses, and interest expense, incurred during the normal operation of a business.
Financial Plan
Describes each of the activities, resources, equipment, and materials that are needed to achieve objectives, as well as the timeframes involved.
Financial Projections
Use existing or estimated financial data to forecast your business’s future income and expenses. They often include different scenarios to see how financial changes affect profitability.
Financing Cash Flow
Cash received or paid from borrowing money or paying back investors, creditors, and shareholders. The third part of calculating net cash flow on the cash flow statement.
Fixed Assets
Assets that the company does not plan to turn into cash within one year or that would take longer than one year to convert, including property, plants, machinery, and patents.
Gross Profit
An item included on the income statement of production companies, calculated by deducting cost of goods sold from revenues/sales generated from those goods.
Income Statement
A financial statement that specifies the financial results of a business over a defined period of time and lists the revenue, expenses, and net income of the business.
Income Tax
Tax levied by the government for income and part of the expenses deducted from revenues when arriving at net income on the income statement.
Interest Expense
Represents all interest paid by the company for loans it incurred and is part of the expenses deducted from revenues in the process of arriving at net income on the income statement.
Investing Cash Flow
Cash used for investing in long-term assets, such as equipment or equity securities, and cash received from the sale of such investments.
Liabilities
Debts a company owes to its creditors and lenders.
Long-Term Liabilities
The flip side of fixed assets, this represents money the company needs to pay back in one or more years. It includes long-term bank loans, mortgages, and bonds.
Net Loss
The bottom line of the income statement. The negative profit (loss) left after all expenses have been deducted from revenues.
Net Profit
The bottom line of the income statement. The profit left after all expenses have been deducted from revenues.
Operating Cash Flow
The first section of the cash flow statement, which includes cash generated by and required for the daily operations of a business.
Operating Earnings
Earnings left after subtracting the cost of goods sold and operating expenses from a company’s revenues on the income statement. Also called EBIT.
Operating Expenses
All costs incurred in operating the business that are not directly related to the production and storage of a company’s goods.
Owners’ Equity
Equals all assets minus all liabilities and represents the part of the company owned by its shareholders.
P&L Statement
A financial statement that specifies the financial results of a business over a defined period of time and lists the revenue, expenses, and net income of the business.
Profit Margin
An indicator of profitability. It is calculated by dividing the company’s net income by its revenue for the same period.
Retained Earnings
Money reinvested into the company after all dividends are paid. Reported as part of owners’ equity on the balance sheet.
Revenues
Money generated by the company by selling its products or services to customers, before deducting any expenses.
Working capital
Also known as net working capital (NWC), is the difference between a company’s current assets and its current liabilities.
