Financial Statements and Balance Sheet Vocabulary (Video)

Vocabulary flashcards covering key balance sheet concepts, assets, liabilities, equity, and related terms discussed in the video lecture.

Balance sheet

A financial statement showing assets, liabilities, and shareholder equity at a specific date; assets equal liabilities plus equity.

Assets

Resources controlled by a company expected to bring future economic benefits; can be current or long-term and tangible or intangible.

Liabilities

Obligations owed to outsiders; can be current (due within one year) or long-term.

Equity

Residual interest in the assets after liabilities; funded by common stock and retained earnings.

Current assets

Assets expected to be used or converted to cash within one year (e.g., cash, accounts receivable, inventory, marketable securities).

Long-term assets

Assets expected to provide value for more than one year (e.g., PPE, intangible assets).

Cash

Money on hand or in bank accounts; the most liquid asset.

Marketable securities

Short-term debt securities or money market instruments that can be readily sold; included in current assets.

Accounts receivable

Amounts owed by customers for goods or services already provided; represents expected cash inflows.

Inventory

Goods held for sale, including raw materials, work-in-progress, and finished goods.

Property, Plant, and Equipment (PPE)

Long-term tangible assets used in operations, such as buildings, machinery, and land.

Intangible assets

Long-term assets without physical form (e.g., patents, goodwill).

Accounts payable

Amounts owed to suppliers for purchases on credit; typically a spontaneous current liability with little or no interest.

Accruals

Expenses or taxes incurred but not yet paid (e.g., wages, sales taxes); future cash outflows.

Notes payable

Formal short-term debt with a loan agreement and interest; current portion of debt.

Short-term debt

Debt due within one year (e.g., notes payable, current portion of long-term debt).

Long-term debt

Debt with a maturity beyond one year.

Common stock

Funding raised by issuing shares to the public; appears on the balance sheet at issued amount and does not reflect current market price.

Retained earnings

Accumulated net income kept in the company after dividends; represents reinvested profits and can be positive or negative.

Market value

Current value of a company’s equity (stock price × shares outstanding); reflects future expectations and market perception.

Book value

Value of equity recorded on the balance sheet based on historical cost; often different from market value.

Shares outstanding

Total shares currently issued and held by investors; used to compute market value and market capitalization.

Stock repurchase (buyback)

When a company buys back its own shares, reducing shares outstanding and often returning value to shareholders.

Dividends

Distributions of profits to shareholders; reduce retained earnings and cash.

10-Q and 10-K

Public filings: 10-Q is a quarterly report (unaudited); 10-K is the annual, audited report with footnotes.

Audited

Evaluation of financial statements by an independent accounting firm to verify accuracy and fairness of presentation.

Net working capital (NWC)

Current assets minus current liabilities; a measure of short-term liquidity.

Net operating working capital (NOWC)

Operating current assets minus operating current liabilities (excludes non-operating items like marketable securities); indicates financing required for normal operations.

Balance sheet as a snapshot vs income statement as a video

Balance sheet captures a point-in-time picture of financial position; income statement and cash flow show performance over a period.