Accounting Reports and Analysis

Inventory Turnover

is a financial ratio that measures how many times a company's inventory is sold and replaced over a period. It indicates the efficiency of inventory management and sales performance.

Quick Ratio

is a financial metric that measures a company's ability to meet its short-term obligations with its most liquid assets, excluding inventory. It provides insight into a company's short-term financial health.

Current Ratio

is a liquidity ratio that measures a company's ability to cover its short-term liabilities with its short-term assets. It indicates the financial stability of a company in terms of fulfilling its obligations.

Instant Ratio

is a financial metric that assesses a company's ability to meet its short-term liabilities using liquid assets, similar to the quick ratio but with a more specific focus on immediate cash availability.

Days Inventory

Outstanding is a metric that indicates the average number of days a company takes to sell its entire inventory during a specific period. It helps in assessing inventory management efficiency.

Operating Cycle

is the average time it takes for a company to purchase inventory, sell it, and collect the cash from sales. This cycle reflects the efficiency of a company's operations in managing its working capital. Equals to days inventory + days receivable

Cash Cycle

time it takes for company to convert investments in inventory and accounts receivable back into cash. equals to days inventory + days receivable - days payable

Net Profit Margin Ratio

profitability ratio that measures the percentage of revenue remaining as profit after deducting all expenses, including taxes, interest, and operating costs. equals to net sales - COGS/ net sales

Equity

The residual interest of assets after deducting all liabilities

Liabilities

present obligation of the entity to transfer an economic resource as a result of past events

Assets

present economic resource controlled by an entity that has the potential to produce economic benefits

Accrual Accounting

economic reality of an event and cash flow do not always happen at the same time

provisions

supplying something/setting aside something for future expenses

contingent liabilities

the possibility of a liability (unsure)

expense (part of financial statement)

the outflow of cash, the depletion of an asset, or the incurrence of a liability while generating revenue (part of expenditure)

cost

the monetary value of resources (labor, materials, overhead) used to produce a good, deliver a service, or acquire an asset

expenditure

the act of spending money or incurring a liability to acquire goods, services, or assets

Good information

Relevance: timeliness, comparability, understandibility and Reliability: Verifiability

revenue (part of financial statement)

income that arises in course of ordinary activities of an entity

income (part of financial statement)

increase in assets or decrease in liabilities, resulting in an increase in equity

Carrying Amount

dollar value assigned to assets and liabilities on balance sheet

Historical Cost

assets and liabilities recorded at purchased price

current value

records assets at current market value

current cost

value to replace it

fair value

price you would get from selling it on market

value in use

PV of future cash flows asset is expected to generate

Capitalising

recording cost as long-term asset instead

Investing Cash flow

tracks the cash used or generated from long-term investments and asset transactions.

Free Cash Flow

cash a company has left over after paying for its operations and capital expenditures (like new equipment)