- Balance Sheet: A financial statement that presents a company’s financial position at a specific point in time, showing assets, liabilities, and equity.
- Income Statement: A financial statement that summarizes a company’s revenues, expenses, and net income over a specific period.
- Cash Flow Statement: A financial statement that reports the cash generated and used by a company’s operating, investing, and financing activities.
- Statement of Retained Earnings: A financial statement that shows changes in a company’s retained earnings over a specific period, including net income, dividends, and adjustments.
- Asset: Anything of value owned by a company, such as cash, inventory, property, or equipment, listed on the balance sheet.
- Liability: Financial obligations or debts owed by a company, such as loans, accounts payable, or bonds, listed on the balance sheet.
- Equity: The ownership interest in a company’s assets after deducting liabilities, representing shareholders’ stake, listed on the balance sheet.
- Current Assets: Assets expected to be converted into cash or consumed within one year, including cash, accounts receivable, and inventory, listed on the balance sheet.
- Non-current Assets: Assets expected to provide economic benefits beyond one year, such as property, plant, and equipment, listed on the balance sheet.
- Current Liabilities: Debts or obligations due within one year, including accounts payable, short-term loans, and accrued expenses, listed on the balance sheet.
- Non-current Liabilities: Debts or obligations not due within one year, such as long-term loans or bonds, listed on the balance sheet.
- Owners’ Equity: The residual interest in the assets of a company after deducting liabilities, representing shareholders’ equity, listed on the balance sheet.
- Retained Earnings: Accumulated profits not distributed as dividends, reinvested in the business, or retained for future use, listed on the balance sheet.
- Revenues: Income generated from the sale of goods or services, reported on the income statement.
- Expenses: Costs incurred in the process of generating revenue, such as salaries, rent, and utilities, reported on the income statement.
- Gross Profit: Revenue minus the cost of goods sold, representing the profitability of a company’s core business activities, calculated on the income statement.
- Operating Income: Profit earned from a company’s normal business operations, calculated by subtracting operating expenses from gross profit, reported on the income statement.
- Net Income: Profit earned by a company after deducting all expenses, including taxes, interest, and depreciation, reported on the income statement.
- Earnings Before Interest and Taxes (EBIT): A measure of a company’s operating performance, calculated as revenue minus operating expenses, excluding interest and taxes, reported on the income statement.
- Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA): A measure of a company’s operating performance, calculated as revenue minus operating expenses, excluding interest, taxes, depreciation, and amortization, reported on the income statement.
- Cost of Goods Sold (COGS): The direct costs attributable to the production of goods sold by a company, including materials, labor, and overhead, reported on the income statement.
- Depreciation: The allocation of the cost of tangible assets over their useful lives, reducing their value on the balance sheet over time, and expensed on the income statement.
- Amortization: The allocation of the cost of intangible assets over their useful lives, reducing their value on the balance sheet over time, and expensed on the income statement.
- Accumulated Depreciation: The cumulative amount of depreciation recorded for tangible assets since their acquisition, reducing their net book value on the balance sheet.
- Accrued Expenses: Liabilities for expenses incurred but not yet paid or recorded, such as wages, interest, or taxes, reported on the balance sheet.
- Accrued Revenue: Revenue earned but not yet received or recorded, such as interest or rent, reported on the balance sheet.
- Prepaid Expenses: Expenses paid in advance but not yet incurred, such as insurance or rent, reported as assets on the balance sheet.
- Deferred Revenue: Revenue received in advance but not yet earned, such as subscription fees or prepaid rent, reported as liabilities on the balance sheet.
- Inventory: The value of goods held by a company for sale or production, reported as a current asset on the balance sheet.
- Goodwill: The excess of the purchase price of a business over the fair value of its identifiable net assets, reported as an intangible asset on the balance sheet.
- Intangible Assets: Non-physical assets with long-term value, such as patents, trademarks, or copyrights, reported on the balance sheet.
- Tangible Assets: Physical assets with measurable value, such as land, buildings, or equipment, reported on the balance sheet.
- Financial Assets: Assets that derive their value from a contractual claim, such as stocks, bonds, or derivatives, reported on the balance sheet.
- Financial Liabilities: Liabilities that derive their value from a contractual obligation, such as loans, bonds, or derivatives, reported on the balance sheet.
- Operating Activities: The cash inflows and outflows resulting from a company’s primary business activities, reported on the cash flow statement.
- Investing Activities: The cash inflows and outflows resulting from a company’s investments in assets, such as property, plant, and equipment, reported on the cash flow statement.
- Financing Activities: The cash inflows and outflows resulting from a company’s financing activities, such as issuing or repurchasing stock, or borrowing or repaying debt, reported on the cash flow statement.
- Operating Cash Flow (OCF): The cash generated or used by a company’s core business operations, reported on the cash flow statement.
- Investing Cash Flow (ICF): The cash generated or used by a company’s investing activities, such as buying or selling assets, reported on the cash flow statement.
- Financing Cash Flow (FCF): The cash generated or used by a company’s financing activities, such as issuing or repurchasing stock, or borrowing or repaying debt, reported on the cash flow statement.
- Net Cash Flow: The difference between cash inflows and outflows for a specific period, calculated on the cash flow statement.
- Operating Income Margin: The ratio of operating income to revenue, measuring a company’s operating efficiency and profitability, calculated on the income statement.
- Net Profit Margin: The ratio of net income to revenue, measuring a company’s overall profitability, calculated on the income statement.
- Return on Assets (ROA): The ratio of net income to average total assets, measuring a company’s ability to generate profits from its assets, calculated on the income statement.
- Return on Equity (ROE): The ratio of net income to average shareholders’ equity, measuring a company’s profitability relative to its shareholders’ investment, calculated on the income statement.
- Earnings Per Share (EPS): The ratio of net income to the average number of outstanding shares, measuring a company’s profitability on a per-share basis, calculated on the income statement.
- Price-to-Earnings (P/E) Ratio: The ratio of a company’s stock price to its earnings per share, used to assess the relative value of a stock.
- Dividend Payout Ratio: The ratio of dividends paid to shareholders to net income, measuring the proportion of earnings distributed as dividends, calculated on the income statement.
- Working Capital: The difference between current assets and current liabilities, representing a company’s short-term liquidity and operational efficiency, calculated on the balance sheet.
- Quick Ratio: The ratio of liquid assets to current liabilities, measuring a company’s ability to cover short-term obligations with its most liquid assets, calculated on the balance sheet.
- Debt-to-Equity Ratio: The ratio of total debt to shareholders’ equity, measuring a company’s leverage and financial risk, calculated on the balance sheet.
- Interest Coverage Ratio: The ratio of operating income to interest expense, measuring a company’s ability to meet interest payments on its debt obligations, calculated on the income statement.
- Inventory Turnover Ratio: The ratio of cost of goods sold to average inventory, measuring how efficiently a company manages its inventory, calculated on the income statement and balance sheet.
- Return on Investment (ROI): The ratio of net profit to the cost of investment, measuring the profitability of an investment relative to its cost.
- Gross Margin: The ratio of gross profit to revenue, measuring a company’s profitability after accounting for the cost of goods sold, calculated on the income statement.
- Operating Margin: The ratio of operating income to revenue, measuring a company’s operating efficiency and profitability, calculated on the income statement.
- Profitability Ratios: Ratios that measure a company’s ability to generate profit relative to its revenue, assets, or equity, including gross margin, operating margin, and net profit margin.
- Liquidity Ratios: Ratios that measure a company’s ability to meet short-term obligations with its most liquid assets, including current ratio and quick ratio.
- Solvency Ratios: Ratios that measure a company’s ability to meet long-term obligations, including debt-to-equity ratio and interest coverage ratio.
- Efficiency Ratios: Ratios that measure how effectively a company uses its assets and resources to generate revenue and profit, including inventory turnover ratio and asset turnover ratio.
- Horizontal Analysis: Financial analysis that compares financial data over different periods to identify trends and changes in performance.
- Vertical Analysis: Financial analysis that compares each line item on a financial statement as a percentage of a base item to assess relative proportions.
- Common-Size Financial Statements: Financial statements in which each line item is expressed as a percentage of a base item, allowing for easy comparison between companies or periods.
- Ratio Analysis: Financial analysis that uses various ratios to evaluate a company’s financial performance, liquidity, solvency, and efficiency.
- Trend Analysis: Financial analysis that examines changes in financial data over time to identify patterns and predict future performance.
- Cash Basis Accounting: Accounting method that records revenue and expenses when cash is received or paid, regardless of when the transaction occurred, typically used by small businesses.
- Accrual Basis Accounting: Accounting method that records revenue when earned and expenses when incurred, regardless of when cash is received or paid, providing a more accurate representation of a company’s financial performance.
- GAAP (Generally Accepted Accounting Principles): The standard framework of accounting principles, standards, and procedures used to prepare and report financial statements in the United States.
- IFRS (International Financial Reporting Standards): Global accounting standards issued by the International Accounting Standards Board (IASB) to promote consistency and transparency in financial reporting.
- Consolidated Financial Statements: Financial statements that combine the financial information of a parent company and its subsidiaries into a single set of statements, reflecting the economic reality of the entire group.
- Interim Financial Statements: Financial statements prepared for periods shorter than a full fiscal year, such as quarterly or semi-annual reports.
- Segment Reporting: The disclosure of financial information about different operating segments of a company to provide insight into their performance and contribution to overall results.
- Notes to Financial Statements: Supplementary information accompanying financial statements that provide additional details and explanations about specific line items and accounting policies.
- Auditor’s Report: A statement issued by an independent auditor expressing an opinion on the fairness of a company’s financial statements and adherence to accounting standards.
- Going Concern Assumption: The assumption that a company will continue to operate indefinitely, allowing for the preparation of financial statements on that basis.
- Materiality Principle: The principle that requires financial information to be reported if it could influence the decisions of users of the financial statements.
- Conservatism Principle: The principle that requires accountants to be cautious and conservative in their estimates and financial reporting, erring on the side of understating rather than overstating assets and income.
- Matching Principle: The principle that requires expenses to be recognized in the same period as the revenues they help to generate, ensuring proper matching of costs and benefits.
- Revenue Recognition Principle: The principle that requires revenue to be recognized when earned, regardless of when cash is received, based on the completion of a service or delivery of goods.
- Full Disclosure Principle: The principle that requires all material information relevant to financial statements to be disclosed to users, ensuring transparency and completeness.
- Consistency Principle: The principle that requires companies to use the same accounting methods and procedures from one period to the next, ensuring comparability and reliability of financial statements.
- Conservatism Principle: The principle that requires accountants to be cautious and conservative in their estimates and financial reporting, erring on the side of understating rather than overstating assets and income.
- Fair Value Accounting: Accounting method that values assets and liabilities at their current market price, providing more relevant and timely information to users of financial statements.
- Historical Cost Accounting: Accounting method that values assets and liabilities at their original purchase price, providing a more conservative and verifiable basis for financial reporting.
- Cash Flow from Operating Activities: The cash inflows and outflows resulting from a company’s primary business operations, reported on the cash flow statement.
- Cash Flow from Investing Activities: The cash inflows and outflows resulting from a company’s investments in assets, such as property, plant, and equipment, reported on the cash flow statement.
- Cash Flow from Financing Activities: The cash inflows and outflows resulting from a company’s financing activities, such as issuing or repurchasing stock, or borrowing or repaying debt, reported on the cash flow statement.
- Direct Method of Cash Flow Statement: Method of preparing the cash flow statement that directly lists cash receipts and payments from operating activities.
- Indirect Method of Cash Flow Statement: Method of preparing the cash flow statement that adjusts net income for non-cash items and changes in working capital to derive cash flow from operating activities.
- Cash Flow per Share: The ratio of cash flow from operating activities to the average number of outstanding shares, measuring a company’s ability to generate cash flow on a per-share basis.
- Free Cash Flow (FCF): The cash flow available for distribution to shareholders after deducting capital expenditures and debt repayments from operating cash flow, representing a company’s ability to generate cash.
- Operating Cash Flow Ratio: The ratio of operating cash flow to current liabilities, measuring a company’s ability to cover short-term obligations with operating cash flow.
- Cash Flow Coverage Ratio: The ratio of operating cash flow to total debt, measuring a company’s ability to repay its debt obligations with operating cash flow.
- Cash Conversion Cycle: The time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.
- Statement of Comprehensive Income: A financial statement that reports all changes in equity other than transactions with shareholders, including unrealized gains and losses, reported in the income statement or other comprehensive income.
- Statement of Changes in Equity: A financial statement that shows changes in a company’s equity over a specific period, including contributions, distributions, and changes in retained earnings.
- Statement of Cash Flows: A financial statement that reports the cash generated and used by a company’s operating, investing, and financing activities over a specific period.
- Statement of Financial Position: Another term for the balance sheet, reflecting a company’s financial position at a specific point in time.
- Statement of Operations: Another term for the income statement, showing a company’s revenues, expenses, and profits over a specific period.
- Statement of Shareholders’ Equity: Another term for the statement of changes in equity, detailing changes in a company’s equity accounts over a specific period.