IB - Accounting Terms

Technical Materials

Income Statement

• Shows financial performance over a period of time

• Net Income IS NOT CASH FLOW

COGS

Cost directly related to the sale of products

Operating Expenses

Expense a business incurs through its normal business operations

Depreciation Expense

• Spreads out the cost of an asset over its useful life

  • Depreciation/interest expenses are tax deductible

Accrual Accounting

Revenue/expenses is corded when earned/incurred

Cash Accounting

Revenue/expenses is recorded when recieved/spent

Annual Reporting

Showcases financial performance for the past 3 years

Earnings per share (EPS)

Company’s net income divided by common shares

Company Value

Cash Flow / (Discount Rate - Cash Flow Growth Rate)

Revenue

Represents total sales across all segments

Cost of Goods Sold

Represents expenses that can be linked to individual units sold

Gross Margin

Tells you how much additional profit you would earn from each sale before fixed expenses

Operating Expenses

Include items that can’t be linked to individual products sold

Operating Income

Tells you how much the business earned before “side activties,” interest, and taxes

Net Income

How much a company earned AFTER all taxes and expenses in all categories