ACCT ch 3

Balance Sheet

a listing of all assets, liabilities, and stockholders’ equity accounts at a specific point in time; also called statement of financial position

Capital Stock

shares of stock that are issued by the company to investors to raise financing for capital expenditures and operations. An equity account

Cash Ratio

a liquidity metric which measures the ability of a business to meet its short term obligations that are due within a year solely with cash. Cash divided by current liabilities

Cost of Goods Sold (COGS)

an expense reflecting the cost of the merchandise that the business sold to customers the period

Current Asset

an asset expected to be used or converted into cash within one year or financial cycle

Current Liability

amounts due to creditors within one year or financial cycle

Current Ratio

a liquidity metric which measures the ability of a business to meet its short term obligations that are due within a year with readily convertible assets. Current assets divided by current liabilities.

Gains and Losses

a net increase (gain) or a net decrease (loss) to assets from occurrences that are outside of an organizations primary operations

Gross Profit

the difference between revenue and cost of goods sold; also called gross margin or markup on products

Income Statement

a listing of all revenues earned and expenses incurred during a specific period of time as well as all gains and losses; also called statement of operations or statement of earnings

Liquidity

the ease with which assets can be converted into cash.

Operating Income

the portion of a company’s profits which reflects activity from its primary business function. Does not include incidental activities such as gains or losses, or involuntary expenses such as income taxes

Retained Earnings

cumulative total of the net income earned by an organization during its existence in excess of dividends distributed to the owners; indicates the amount of the net assets currently held that came from operations over the life of the organization.

Statement of Cash Flows

a listing of all cash inflows (sources) and cash outflows (uses) during a specific period of time.

Statement of Retained Earnings

a financial statement that reports the change in a corporation’s retained earnings account from the beginning of a period to the end; the account is increased by net income and decreased by a reported net loss and/or any dividends declared

Stockholders’ Equity

the remaining value of shareholder ownership after subtracting all liabilities from assets. It represents the value that would be returned to shareholders if the company’s assets were sold and the debts were paid off

Working Capital

a liquidity metric which measures the capability of a business to meet its short term obligations that are due within a year. Current assets minus current liabilities.