Key Business Terms 2

Question 1

Accrual Basis Accounting

Answer 1

income and expenses are booked when occurred

Question 2

Cash-basis Accounting

Answer 2

Income and expenses are booked each period

Question 3

Contribution Margin

Answer 3

Sales-variable cost aka Gross margin

Question 4

Contribution Margin Percentage

Answer 4

Contribution Margin/Sales aka. Gross Margin percentage

Question 5

Culminative Profits

Answer 5

Sum of Company Profits over multiple periods

Question 6

Current Ratio

Answer 6

current assets/current liabilities, solvency, bigger ratio better financial situation

Question 7

Dividend

Answer 7

payment to stockholders as a return on their investment. Reduce retained earnings.

Question 8

EBIT

Answer 8

Earnings Before Interest and Taxes aka operating profit

Question 9

EPS

Answer 9

Earnings Per Share Net Income/Outstanding Shares

Question 10

EBITA

Answer 10

Earnings Before Interest Taxes Amoritization

Question 11

Financial Structure

Answer 11

Relationship between Debit and Equity

Question 12

Fixed Assests

Answer 12

Assets difficult to convert to cash like building and equipment

Question 13

Leverage

Answer 13

Total Assets/Total Equity, measure of risk for investors

Question 14

Net Margin

Answer 14

Contribution Margin: Revenue - variable costs- fixed costs

Question 15

Period Costs

Answer 15

Costs not tied directly to the sale of a unit like dadministration, salespeople

Question 16

Working Capital

Answer 16

Current Assests - Current Liabilities

Question 17

ROA

Answer 17

Return on Assets Net income/Assets: how well company has invested in its assests