Fundamentals of Accounting: A Users' Perspective - Module 1

Vocabulary flashcards covering the basics of annual reports, users of financial information, accounting regulatory bodies, and the roles of auditors and management.

Annual Report

A financial document designed to report on a company's activities and financial performance over the past year to shareholders and other interested parties.

Balance Sheet

Also known as the Statement of Financial Position, it shows the financial position of a company on a given day.

Income Statement

A financial statement that shows the economic performance of a company over a given period.

Statement of Cash Flows

A financial statement that shows the financial performance and cash movements of a company over a given period.

EBIT Margin

A financial highlight calculated using the formula $\frac{\text{EBIT}}{\text{net sales}}$.

ROI

Return on Investment, calculated in this context as $\frac{\text{Operating income}}{\text{fixed assets}}$.

External Users

Individuals or entities outside the firm that require financial information, including lenders, suppliers, shareholders, government agencies, the SEC, customers, and employees.

Internal Users

Individuals within the firm who use financial information, including the Board of Directors and managers from departments such as Purchasing, Finance, Production, Marketing, and Human Resources.

Investor Relations (IR)

A strategic management responsibility integrating finance, communication, marketing, and securities law compliance to enable effective two-way communication between a company and the financial community.

Investor Relator

The specific officer in charge of a company's investor relations.

GAAPs

General Accepted Accounting Principles; the specific accounting rules used to prepare financial statements, which vary from country to country.

IASB

International Accounting Standards Board; an independent, private-sector body formed in 2001 that develops and approves International Financial Reporting Standards (IFRSs).

IFRS

International Financial Reporting Standards; globally recognized accounting standards issued by the IASB to harmonize accounting rules across different jurisdictions.

IFRIC

International Financial Reporting Interpretations Committee; a body that provides interpretations of international accounting standards.

Auditors

Individuals or public accounting firms that inspect and verify the accuracy of a company's financial records to issue an opinion on the quality of financial measurement.

CFO

Chief Financial Officer; the senior-most executive responsible for financial control, budgeting, coordinating financing, monitoring liquidity, and providing financial data to the CEO.

Footnotes

Section of the annual report used to explain specific elements and details of the financial statements.