Essential Concepts of Business for Lawyers

A collection of vocabulary terms and their definitions related to accounting and financial statements important for business and legal contexts.

Accounting

The study of keeping track of money and items reducible to money; an analytic tool for businesses.

Assets

Probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.

Liabilities

Probable future sacrifices of economic benefits arising from present obligations of an entity.

Equity

A statement of ownership that indicates the net worth of a business after liabilities are deducted from assets.

Income Statement

A financial statement that shows the company's revenues and expenses over a specific period.

Balance Sheet

A financial statement that presents the financial position of a company at a specific point in time, listing assets, liabilities, and equity.

Cash Flow Statement

A financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company.

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.

Earnings Per Share (EPS)

A measure of a company's profitability, calculated as net income divided by the number of outstanding shares.

Working Capital

The difference between current assets and current liabilities, indicating the short-term financial health of a company.

Financial Statements

Documents that provide an overview of a company's financial condition, typically including balance sheet, income statement, and cash flow statement.

Current Assets

Assets that are expected to be converted to cash or used up within one year.

Non-Current Assets

Assets that are not expected to be converted to cash or used up within one year.

Current Liabilities

Obligations that a company needs to settle within one year.

Non-Current Liabilities

Financial obligations that are due beyond one year.

Fiduciary Duty

A legal obligation for one party to act in the best interest of another, especially in the context of corporate directors and lawyers.

Financial Position

A snapshot of what a business owns and owes at a given moment, often analyzed through a balance sheet.

Financial Performance

Analysis of income and expenses over a period of time to show how well a business generates profit.

Cash Movement

The inflows and outflows of cash, tracked through the cash flow statement.

Market Value

The total value of a company based on its stock price and market capitalization.

Book Value

The value of an asset as it appears on a balance sheet, represented as the asset's original cost minus depreciation.