Key Business Terms 3

Question 1

Acid Test Ratio

Answer 1

(cash+recievables+marketable securities)/ current liabilities

Question 2

Amortization Expense

Answer 2

The expense of intangible assests(copyrights) over time

Question 3

Asset Turnover

Answer 3

Sales Within a Given Year/Total Assets Measures how efficiently a company uses its assets. Higher, the better

Question 4

Banker’s ratio

Answer 4

Current Ratio aka Current Assests/Current Liabilities

Question 5

Book Value

Answer 5

Total Equity, value at which an asset is carried on the balance sheet

Question 6

Book Value Per Share

Answer 6

Total Equity/ Total Shares Outstanding

Question 7

Breakeven

Answer 7

volume level at which Total Contribution from product = total fixed costs

Question 8

How to calculate Breakeven?

Answer 8

Variable cost per unit - selling price and then divide the total fixed costs by the unit contribution.

Question 9

Capital Expenditure

Answer 9

Capital investment. The amount required to acquire or improve capital assets (fixed assets)

Question 10

Cumulative Cash Flow

Answer 10

The total free cash flow since you took over the company