RD Exam Flashcards
Top Down Budget
prepared by upper management and given to operating units
Bottom-Up Budget
each unit prepares a budget that is then sent up to upper management
Baseline Budget
starts with previous budget and adjusts for current conditions
Zero Based Budget
determines cost, outlay and inflows without a baseline budget. Aims to eliminate unnecessary expenses, works better for discretionary costs vs operating costs
Fixed Budget
static budget, do not change based on business variations
Flexible Budget
changes w/ business acitivty bc the budget is constrcuted with a rate of per unit of activity rather than a fixed amount. Used for measuring efficiency
Incremental budget
Uses existing budget numbers as a base and adds incremental amounts relative to current budget
Value Proposition Budgeting
budget-building mindset
Assets-to-liabilities Ratio
the percentage of assets divided by debt
Debt-to-equity ratio
the percentage of assets funded by shareholders equity and debt
Inventory Turnover Rate
Costs of goods sold/average inventory
Used to assess if there is efficient use of assets
Profitability ratio
ability to generate excess income relative to sales
Solvency ratio
ability to meet long term debts
Liquidity ratio
ability to meet short-term debts
Activity ratio
ability to transfer non-cash assets to cash assets
Current ratio
divide current assets by current liabilities
Net profit
Gross profit - total expenses
total assets
indicate monetary value of a property beyond any amounts owed - everything the company owns, including liability
current assets
liquid assets, or those easily converted to cash
accounts receivable
money owed by the company that will be fulfilled promptly, such as CC payments
accounts payable
money the company owes, such as to vendors or wholesalers
accumlated depreciation
a fixed asset, the total depreciation of an asset up to a given date
current liabilities
includes account payable and accrued expenses that must be paid within 12 months
owners equity
monetary value of property, beyond debts, including retained earnings