Finance & Accounting Business Administration Core Vocabulary (3)

Accounting

The process of recording, analyzing, and interpreting financial information.

Accounting Equation

Assets = Liabilities + Owner’s Equity.

Accounts Payable

Money a business owes to suppliers.

Accounts Receivable

Money owed to a business by customers.

Accrual Accounting

Recording revenue when earned and expenses when incurred, regardless of cash flow.

Amortization

Gradually paying off debt or spreading out the cost of an intangible asset.

Annual Report

A company's yearly report to shareholders detailing financial performance.

Asset

Anything of value owned by a business.

Audit

An official examination of a company’s financial records for accuracy.

Balance Sheet

A financial statement showing assets, liabilities, and equity at a specific point in time.

Bank Reconciliation

Comparing the company’s records with the bank statement to ensure they match.

Bond

A long-term debt investment in which an investor loans money to a business or government.

Break-Even Point

The level of sales where total revenue equals total costs.

Budget

A financial plan outlining expected income and expenses.

Capital

Money or assets used to start or run a business.

Capital Expenditure

Money spent on long-term assets like machinery or buildings.

Cash Flow

The movement of money in and out of a business.

Cash Flow Statement

A financial report showing cash inflows and outflows.

Collateral

Assets pledged to secure a loan.

Credit

Buying now and paying later; also the accounting term for an increase in liabilities or equity.

Credit Score

A rating that indicates a borrower’s creditworthiness.

Current Asset

An asset expected to be converted to cash within one year.

Current Liability

A debt that must be paid within one year.

Debt

Money borrowed and owed to others.

Debt Financing

Raising money by borrowing from external sources.

Depreciation

A decline in value of a physical asset over time.

Dividends

Payments made to shareholders from corporate profits.

Equity

The owner’s claim on business assets after liabilities are subtracted.

Expense

Money spent in order to run a business.

Fiscal Year

A 12-month accounting period used for financial reporting.

Fixed Asset

A long-term asset such as land, buildings, or equipment.

Fixed Expense

A business cost that does not change with production levels.

Forecasting

Predicting future financial outcomes using data and trends.

Gross Profit

Revenue minus cost of goods sold (COGS).

Income Statement

A financial statement showing revenue, expenses, and profit over a period.

Interest

The cost of borrowing money.

Inventory

Goods a business has on hand for sale or production.

Liability

A legal debt or obligation that must be paid.

Liquidity

How easily an asset can be converted into cash.

Loan

Borrowed money that must be repaid with interest.

Loss

When expenses exceed revenue.

Net Income

Profit remaining after all expenses are deducted from total revenue.

Net Worth

The value of total assets minus total liabilities.

Operating Expenses

Day-to-day expenses needed to run a business.

Opportunity Cost

The value of the next best alternative given up when making a choice.

Owner’s Equity

The owner’s investment in a business minus liabilities.

Payroll

The total wages and salaries paid to employees.

Profit Margin

Net income divided by revenue, expressed as a percentage.

Profitability

The ability of a business to generate profit.

Return on Investment (ROI)

A measure of profitability: (Gain − Cost) ÷ Cost.

Revenue

Total income generated from the sale of goods or services.

Risk

The possibility of financial loss.

Short-Term Financing

Borrowing money for one year or less.

Solvency

A business’s ability to meet long-term obligations.

Transaction

Any business activity involving money.

Variable Expense

A cost that changes with production levels.

Venture Capital

Money invested by private investors in new, high-growth businesses.

Working Capital

Current assets minus current liabilities.