Financial Analysis Vocab

insurance coverage

the amount of risk or liability protected by an insurance policy, obligating the insurer to pay for specific losses, damages, or injuries

deductible

a specified amount of money that the insured must pay before an insurance company starts paying for covered expenses

premium

the amount of money an individual or business pays regularly (monthly, quarterly, or annually) to an insurance company to keep a policy active; think of it like a subscription

accounting

the process of recording, classifying, summarizing, and analyzing financial transactions to measure business performance and communicate financial health

financial accounting

type of accounting that records, summarizes, and reports a company’s financial transactions to external users (investors, creditors, and regulators) through standardized financial statements; reports past performance to external parties

managerial accounting

the process of analyzing, interpreting, and reporting financial and operational data to internal managers for decision-making, planning, and control; focuses on future-oriented strategies, budgeting, and cost management

tax accounting

type of accounting focused on complying with government tax regulations by preparing, analyzing, and reporting tax-related financial information; adheres to specific tax code to determine, calculate, and minimize tax liabilities for individuals and businesses

cost accounting

the process of tracking, analyzing, and allocating all expenses (direct materials, labor, and overhead) related to production or business operations; helps management determine true cost of goods, set profitable prices, and make informed decisions to improve financial efficiency

business entity concept

fundamental accounting principle stating that a business is a separate legal and economic entity, distinct from its owners, partners, or shareholders

going concern concept

a fundamental accounting principle assuming a business will continue operating for the foreseeable future and meet its financial obligations