Financial Accounting, Cost Accounting, and Capital Budgeting Formulas and Principles

Vocabulary practice flashcards covering Norwegian business administration, accounting principles, key financial ratios, cost allocation, short-term decision analysis, and capital budgeting methods.

Likviditetsgrad 1 (Current Ratio 1)

A key liquidity ratio measuring a firm's ability to pay short-term debt, calculated as $\frac{\text{Omløpsmidler}}{\text{Kortsiktig gjeld}}$. A historical benchmark is to be greater than $2$.

Likviditetsgrad 2 (Quick Ratio / Acid-Test Ratio)

A strict liquidity measure excluding inventory, calculated as $\frac{\text{Omløpsmidler} - \text{Varelager}}{\text{Kortsiktig gjeld}}$. A historical benchmark is to be greater than $1$.

Likviditetsgrad 3 (Cash Ratio)

A liquidity ratio measuring immediate cash solvency, calculated as $\frac{\text{Disponible bankinnskudd}}{\text{Kortsiktig gjeld}}$.

Egenkapitalprosent (Equity Ratio / Solidity)

A financial solidity metric measuring the share of total assets financed by equity and the firm's capacity to absorb losses, calculated as $\frac{\text{Egenkapital}}{\text{Totalkapital}} \times 100\%$.

Totalkapitalrentabilitet (TKR / Return on Total Assets)

A profitability metric measuring the return on all capital invested in the business regardless of financing structure, calculated as $\frac{\text{Driftsresultat} + \text{Finansinntekter}}{\text{Gjennomsnittlig totalkapital}} \times 100\%$ or $\frac{\text{Ordinært resultat før skatt} + \text{Rentekostnader}}{\text{Gjennomsnittlig totalkapital}} \times 100\%$.

Egenkapitalrentabilitet (EKR / Return on Equity)

A profitability metric measuring return on equity either before tax as $\frac{\text{Resultat før skattekostnad}}{\text{Gjennomsnittlig egenkapital}} \times 100\%$ or after tax as $\frac{\text{Ordinært resultat etter skatt}}{\text{Gjennomsnittlig egenkapital}} \times 100\%$.

DuPont-modellen (DuPont Model)

A framework that breaks down Return on Total Assets into the product of capital turnover and profit margin: $\text{TKR} = \text{Kapitalens omløpshastighet} \times \text{Resultatgrad} = \frac{\text{Driftsinntekter}}{\text{Gjennomsnittlig totalkapital}} \times \frac{\text{Driftsresultat} + \text{Finansinntekter}}{\text{Driftsinntekter}}$.

Totalkapitalens omløpshastighet (Total Capital Turnover)

An activity ratio indicating how efficiently total capital generates turnover, calculated as $\frac{\text{Salgsinntekt}}{\text{Gjennomsnittlig totalkapital}}$.

Resultatgrad (Profit Margin in DuPont Analysis)

The profit margin component of the DuPont model measuring operational earnings relative to sales, calculated as $\frac{\text{Resultat før skatt} + \text{Rentekostnader}}{\text{Salgsinntekter}} \times 100\%$.

Arbeidskapital (Working Capital)

The amount of funds or liquid values readily available within 12 months, calculated as $\text{OM} - \text{KG}$ or $\text{EK} + \text{LG} - \text{AM}$, or expressed as a percentage of turnover: $\frac{\text{Arbeidskapital i kr}}{\text{Salgsinntekter}} \times 100\%$.

EBITDA-margin (EBITDA Margin)

Earnings Before Interest, Taxes, Depreciation, and Amortization expressed as a percentage of operating revenues, calculated as $\frac{\text{Driftsresultat} + \text{Avskrivninger} + \text{Nedskrivninger}}{\text{Driftsinntekter}} \times 100\%$.

Driftsmargin (Operating Margin)

The proportion of operating income remaining after operational expenses have been deducted, calculated as $\frac{\text{Driftsresultat}}{\text{Driftsinntekter}} \times 100\%$.

Resultatmargin (Pre-Tax Profit Margin)

A profitability metric showing the share of turnover remaining as surplus before tax, calculated as $\frac{\text{Resultat før skatt}}{\text{Driftsinntekter}} \times 100\%$.

Kredittid kunder (Average Collection Period)

An efficiency metric showing the average number of days taken to collect payments from credit customers, calculated as $\frac{\text{Gjennomsnittlige kundefordringer}}{\text{Salg på kreditt inkl. mva}} \times 365\,\text{dager}$.

Kredittid hos leverandører (Accounts Payable Days)

An efficiency metric showing the average number of days taken to pay trade creditors, calculated as $\frac{\text{Gjennomsnittlig leverandørgjeld}}{\text{Varekjøp på kreditt inkl. mva}} \times 365\,\text{dager}$.

Lagringstid varer (Inventory Days on Hand)

An efficiency metric showing the average time inventory remains in stock before being sold, calculated as $\frac{\text{Gjennomsnittlig varelager}}{\text{Varekostnader}} \times 365\,\text{dager}$.

Transaksjonsprinsippet (Transaction Principle)

A fundamental accounting principle stating that transactions must be recognized and valued based on their transaction price at the time the transaction takes place.

Opptjeningsprinsippet (Revenue Recognition Principle)

A fundamental accounting principle stating that revenues must be recognized in the income statement when the revenue is earned.

Sammenstillingsprinsippet (Matching Principle)

A fundamental accounting principle requiring expenses to be recognized in the same period as the related revenues they help generate.

Forsiktighetsprinsippet (Prudence Principle)

A fundamental accounting principle dictating that unrealized losses must be recognized in the income statement.

Prinsippet om beste estimat (Best Estimate Principle)

A fundamental accounting principle requiring valuations and assessments to be documented, substantiated, and substantiated as probable.

Kongruensprinsippet (Clean Surplus / Congruence Principle)

A fundamental accounting principle stating that all income and costs must flow through the income statement, meaning that the change in equity ($\Delta\text{EK}$) appears as income minus costs.

Utgående merverdiavgift (Output VAT)

The consumer tax collected by the seller on sales on behalf of the state (standard rate $25\%$), which increases short-term debt ($\text{KG}$) owed to the tax authorities.

Inngående merverdiavgift (Input VAT)

The value-added tax paid on company purchases, which reduces short-term debt ($\text{KG}$) owed to the tax authorities.

Lagerligningen (Inventory Equation)

The fundamental accounting equation reconciling inventory balances and cost of goods sold: $\text{IB Varelager} + \text{Varekjøp} - \text{Varekostnad} = \text{UB Varelager}$.

Avskrivninger (Depreciation)

The systematic expensing of wear and tear or value reduction of a fixed asset over time according to a depreciation plan; it constitutes an accounting cost without causing any cash outflow.

Saldoavskrivning (Declining Balance Depreciation)

A depreciation method where the annual expense decreases each year, calculated as $\text{Årets avskrivning} = \text{Saldo (Bokført verdi)} \times \text{Saldosats}$.

Lineær avskrivning (Straight-Line Depreciation)

A depreciation method where the expense is equal each year, calculated as $\text{Årlige avskrivninger} = \frac{\text{Anskaffelseskost} - \text{Restverdi}}{\text{Levetid}}$.

Feriepenger (Holiday Pay)

Accrued vacation pay earned for the following year's holiday, calculated as $10.2\%$ or $12.5\%$ (for employees over 60 years old) of gross wages.

Arbeidsgiveravgift (Employer National Insurance Contribution)

A mandatory payroll tax paid by the employer to the government, amounting to $14.1\%$ of gross salary plus holiday pay.

Skjulte reserver (Hidden Reserves)

Unrecorded equity reserves not appearing on the balance sheet, typically created by underestimating current assets (over-provisioning bad debts or obsolete inventory) or understating fixed assets (excessive depreciation).

Likviditetsbudsjett (Cash Budget)

A financial forecast displaying budgeted cash inflows and outflows across a period, revealing cash shortfalls or surpluses.

Kostnadsobjekt (Cost Object)

Any item, activity, or entity to which costs are assigned, including products, customer groups, departments, processes, or development projects.

Direkte kostnader (Direct Costs)

Costs that can be unambiguously and directly traced to a single specific cost object, such as raw materials used to produce a single product.

Indirekte kostnader (Indirect Costs / Overhead)

Shared costs whose link to a specific cost object is unclear or collective, requiring allocation via predetermined overhead rates.

Proporsjonale variable kostnader (Proportional Variable Costs)

Variable costs that increase at the exact same pace as production volume, meaning that doubling production doubles total variable costs.

Underproporsjonale variable kostnader (Under-proportional Variable Costs)

Variable costs that grow relatively less than production increases, often because early units were produced less efficiently.

Overproporsjonale variable kostnader (Over-proportional Variable Costs)

Variable costs that grow relatively faster than production output, frequently occurring near capacity constraints due to overtime pay, expensive temp labor, or extra space rentals.

Tilleggskalkulasjon (Overhead Allocation / Markup Costing)

A costing procedure where indirect costs are allocated from departments to cost objects using an overhead rate: $\text{Tilleggssats} = \frac{\text{Totale indirekte kostnader}}{\text{Aktivitetsmål}}$.

Bidragskalkyle (Contribution Costing Method)

A costing approach that includes only variable costs (direct and indirect variable manufacturing, sales, and administrative costs) to determine variable unit cost ($\text{VEK}$).

Selvkostkalkyle (Full Absorption Costing Method)

A comprehensive costing approach incorporating both variable unit costs and fixed unit costs ($\text{VEK} + \text{FEK}$) across manufacturing, sales, and administration.

Dekningsbidrag (DB / Contribution Margin)

The difference between price and variable unit cost ($\text{DB} = \text{Pris} - \text{VEK}$), representing the funds generated to cover fixed costs and yield profit.

Dekningsgrad (DG / Contribution Margin Ratio)

The contribution margin expressed as a proportion of sales price: $\text{DG} = \frac{\text{Dekningsbidrag}}{\text{Pris}}$.

Avanse i prosent (Markup Percentage on Cost)

The pricing markup expressed as a percentage of the purchase cost of goods: $\frac{\text{Salgsinntekter} - \text{Varekostnad}}{\text{Varekostnad}} \times 100\%$.

Bruttofortjeneste i prosent (Gross Margin Percentage)

The gross profit expressed as a percentage of sales turnover: $\frac{\text{Salgsinntekter} - \text{Varekostnad}}{\text{Salgsinntekter}} \times 100\%$.

Sunk Cost (Beslutningsirrelevante kostnader)

Historical, irreversible costs that cannot be altered by future decisions and are therefore irrelevant to managerial decision-making.

Beslutningsrelevante kostnader (Relevant Costs)

Future costs that differ among competing alternatives and reflect the marginal change in costs caused by a decision.

Alternativkostnad (Opportunity Cost)

The forgone benefit or value derived from the next best alternative use of economic resources.

Nullpunkt / NPO (Break-Even Point)

The operational level where total revenues equal total costs ($\text{Resultat} = 0$), calculated in units as $\frac{\text{TFK}}{\text{DB per enhet}}$ and in revenue as $\frac{\text{TFK}}{\text{DG}}$.

Sikkerhetsmargin (Margin of Safety)

The amount by which current or budgeted sales exceed the break-even sales volume, calculated as $\text{SI} - \text{NPO i kr}$ or $\text{Solgte enheter} - \text{NPO i enheter}$.

Sikkerhetsgrad (Margin of Safety Ratio)

The percentage by which actual sales can decline before operating profit reaches zero, calculated as $\frac{\text{Sikkerhetsmargin i kr}}{\text{Salgsinntekt}} \times 100\%$.

Netto nåverdimetoden (Net Present Value Method / NPV)

A capital budgeting method discounting all future project cash inflows and outflows to present value: $\text{NNV} = -I_0 + \sum_{t=1}^n \frac{CF_t}{(1+r)^t}$. Projects with $\text{NNV} > 0$ are accepted.

Internrentemetoden (Internal Rate of Return / IRR)

A capital budgeting technique identifying the discount rate where net present value equals zero ($\text{NNV} = 0$); projects are accepted if $\text{IRR} > \text{Kapitalkostnad}$.

Nåverdiindeks (Profitability Index)

An investment appraisal index used to compare and rank projects by efficiency, defined as $\frac{\text{Netto nåverdi}}{\text{Investeringsbeløp}}$.

Effektiv rente (Effective Annual Interest Rate)

The actual annual interest rate earned or paid after accounting for fees and intra-year compounding periods, calculated as $(1 + r_m)^m - 1$.