Unit 3: chapters 8, 9, & 10 Flashcards
financial statements
summarizes the changes resulting from business transactions that occur during an accounting period
income statement
reports the net income or net loss for a specific period of time
statement of changes in owner’s equity
summarizes changes in the owner’s capital account as a result of business transaction that occur during the period
balance sheet
a report of the balances in the permanent accounts at the end of the period
report form
listing the balance sheet sections one under the other
statement of cash flows
a statement that summarizes the cash receipts and cash payments resulting from business activities during a period
ratio analysis
the process of evaluating the relationship between various amounts in the financial statements
profitability ratio
used to evaluate the earnings performance of the business during the accounting period
return on sales
to examine the portion of each sales dollar that represents profit
Net income/Sales
current assets
those used up or converted to cash during the normal operating cycle of a business (accounts receivable, cash in bank, supplies)
current liabilities
debts of the business that must be paid within the next accounting period
working capital
amount by which current assets exceed current liabilities
represents assets that are available to continue business operations
liquidity ratio
a measure of the ability of a business to pay its current debts as they become due and to provide for an unexpected need for cash
current ratio
reflects the relationship between current assets and current liabilities
current assets/current liabilities
quick ratio
a measure of the relationship between short-term assets and current liabilities
cash & receivables/current liabilities
