Accounts payable are
outstanding credit payable to suppliers
Accounts receivable are
the amount of credit extended to customers that is currently outstanding
Accrual-basis accounting is
an accounting method of recording profits when earned and expenses when incurred, whether or not the profit has been received or the expense paid.
Accrued expenses are
operating expenses that have been incurred but not paid.
Accumulated depreciation is
total (cumulative) depreciation expense taken over an asset's life.
Balance sheet is
a financial report showing a firm's assets, liabilities, and ownership equity at a specific point in time.
Cash flow activities are
operating, investing, and financing activities that result in cash inflows or outflows
Cash flow statement is
a financial report showing a firm's sources of cash as well as its uses of cash.
Cash-basis accounting is
an accounting method of recording profits when cash is received and recording expenses when they are paid.
Cost of goods sold are
the cost of producing or acquiring goods or services to be sold by a firm.
Current assets (working capital) are
assets that can be converted into cash relatively quickly.
Current debt (short-term liabilities) are
borrowed money that must be repaid within 12 months.
Current ratio is
a measure of a company's relative liquidity, determined by dividing current assets by current liabilities.
Debt is
financing provided by creditors.
Debt ratio is
a measure of what percentage of a firm's assets is financed by debt, determined by dividing total debt by total assets.
Financial leverage is
the impact (positive or negative) of financing with debt rather than with equity
Financial statements (accounting statements) are
reports of a firm's financial performance and resources, including an income statement, a balance sheet, and a cash flow statement.
Fixed assets (property, plant and equipment [PPE]) are
physical assets that will be used in the business for more than one year, such as equipment, buildings, and land.
Gross fixed assets are
depreciable assets at their original cost, before any depreciation expense has been taken.
Gross profit are
sales less the cost of goods sold.
Income statement (profit and loss statement) is
a financial report showing the amount of profits or losses from a firm's operations over a given period of time.
Interest expense are
the cost of borrowed money.
Liquidity is
the degree to which a firm has working capital available to meet maturing debt obligations.
Long-term debt are
loans from banks or other sources with repayment terms of more than 12 months.
Long-term notes are
agreements to repay cash amounts borrowed from banks or other lending sources for periods longer than 12 months.
Net fixed assets are
gross fixed assets less accumulated depreciation.
Net profits are
.
earnings that may be distributed to the owners or reinvested in the company
Operating expenses are
costs related to marketing and selling a firm's product or service, general and administrative expenses, and depreciation.
Operating profit margin
a measure of how well a firm is controlling its cost of goods sold and operating expenses relative to sales, determined by dividing operating profits by sales.
Operating profits are
earnings after operating expenses but before interest and taxes are paid.
Other assets are
intangible assets, such as patents, copyrights, and goodwill
Ownership equity is
owners' investments in a company plus cumulative net profits retained in the firm.
Profit margins are
profits as a percentage of sales.
Profits before taxes (taxable profits) are
earnings after operating expenses and interest expenses but before taxes
Retained earnings are
profits less dividends paid over the life of a business
Return on assets are
a measure of a firm's profitability relative to the amount of its assets, determined by dividing operating profits by total assets.
Return on equity is
a measure of the rate of return that owners receive on their equity investment, calculated by dividing net profits by ownership equity.
Short-term notes are
agreements to repay cash amounts borrowed from banks or other lending sources within 12 months or less.
Total asset turnover is
a measure of how efficiently a firm is using its assets to generate sales, calculated by dividing sales by total assets.
Working capital cycle is
the process of converting inventory to cash.
Assets that are relatively liquid are classified as:
current assets.
Total assets less outstanding debt must always equal ownership equity. True or False
False
The best financial ratio to determine a company's ability to pay debt as it come due is the debt ratio. True or False
False
An example of current assets is:
inventories.
The amount of the business owner's initial investment, owner's later investment in the business, and retained earnings comprise:
owner's equity capital.