Untitled Flashcards Set

Income Statement

A summary of a business’s transactions showing net profit before and after taxes, analyzing sales, purchases, costs of goods sold, and operating expenses over a specific time period.

Earnings Statement

Another name for an income statement.

Profit-and-Loss Statement

A financial statement that summarizes the revenues and expenses of a business over a period of time.

Revenue

All of the money earned by a business from all sources.

Cost of Goods Sold

All direct costs required to obtain and/or produce the goods or services that a business sells.

Gross Profit

Determined by subtracting the cost of goods sold from revenue.

Operating Expenses

All expenses related to a business’s ongoing operations, excluding non-operating expenses like taxes and interest.

Operating Earnings

Determined by subtracting operating expenses from gross profit, also referred to as operating income.

Net Income

The business’s final profit, after deducting operating expenses, interest, and taxes from gross profit.

Cumulative Income Statement

Represents a total for a specific time period, usually one year.

Cash Flow

The movement of funds into and out of a business.

Adequate Cash Flow

Essential to business success; insufficient cash flow can lead to insolvency and business failure.

Startup Money

Funds used to bring a business into operations.

Accounts Receivable

Monies owed to a firm by its customers.

Current Assets

Assets that will become cash or be used within 12 months.

Fixed Assets

Property that the company permanently owns; also known as capital assets.

Accumulated Depreciation

The total loss in fixed assets’ value that the business has incurred over time.

Amortization

The decrease in value of intangible assets, written off over an extended period.

Current Liabilities

Debts that must be paid within one year.

Long-term Liabilities

Debts that will take longer than one year to pay.

Owner’s Equity

The value remaining in a business after liabilities have been subtracted from assets.

Net Worth

Also called book value; refers to the total value of a company.

Financial Position Statement

Another name for a balance sheet.

Working Capital

The cash available for day-to-day operations, calculated as current assets minus current liabilities.

Debt-Leverage Ratio

Total liabilities divided by total assets, indicating the proportion of debt financing to equity.

Financial Ratios

Tools for analyzing financial data on income statements, helping to compare categories and performance.

Cash Flow Statement

A financial summary that estimates when, where, and how much money will flow into and out of a business.

Cash Receipts

Sources of income like sales of goods, loans, and interest income.

Total Cash Available

Calculated by adding total cash receipts to the beginning cash balance.

Total Cash Paid Out

The sum of all cash payments made by the business.

Ending Cash Balance

The amount of cash remaining at the end of a period, calculated by subtracting total cash paid out from total cash available.

Snapshot of Financial Condition

What a balance sheet captures at a particular moment in time.

Assets

Anything of value that a business or individual owns.

Liabilities

Debts that the business owes.

Intangible Assets

Non-physical assets that can provide value (e.g., patents, trademarks).

Legal Fees

A miscellaneous expense that can impact cash flow.

Taxes Payable

Current liabilities consisting of taxes owed to the government.

Inventory

Goods available for sale in the regular course of business.

Accounts Payable

Monies owed by the business to suppliers or creditors.

Employee Wages

Salaries and wages owed to employees, classified as a current liability.

Professional Services

Expenses that may include consultation fees and legal services.

Business Solvency

A measure of a business's ability to meet its long-term financial obligations.

Operating Income

Another term for operating earnings, referring to profit from the business's core operations.

Financial Statement

Documents that provide an overview of a company's financial performance.

Predictive Financial Data

Estimates used by new businesses to predict cash flow based on market research.

Non-operating Expenses

Expenses not directly related to the core business operations.

Interest Expense

Cost incurred by the business for borrowed funds.

Comparison between periods

Analyzing income statements over time to assess performance.

Competitive Analysis

Reviewing financial data in relation to competitors to evaluate operational profitability.

Patents

Legal rights granted for inventions, considered intangible assets.

Accumulated Loss

The total amount of value lost in business assets factored into financial assessments.

Goodwill

An intangible asset representing the value of a business's brand or reputation.

Fixed Expenses

Regular expenses that do not vary significantly month to month.

Variable Expenses

Costs that may fluctuate based on business activity.

Solvent Business

A business that has sufficient cash flow to meet its short-term liabilities.

Profit Margin

A measure of profitability calculated as net income divided by revenue.

Snapshot Financial Performance

A depiction of a company's financial status at a specific point in time, typically revealed through balance sheets.

Long-term Debt

Obligations that extend beyond one year.