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32 Cards in this Set

  • Front
  • Back
Fixed Assets
Tangible, relatively long-lived resources. The business has acquired these assets ordinarily in order
to use them in the production of other goods and services. These assets will wear out and be replaced over the long run; therefore, each year they are depreciated (a paper loss in the value of fixed assets).
Increases in equity generated by sales - often called "net sales"
Reductions in equity incurred to earn revenue
Having enough money to pay bills as they come due
Net Income
The extent to which net sales generated during the accounting period exceeded expenses incurred in producing the sales. Also called "earnings" or "profits"
Net Sales
Increases in equity generated by sales - often called "net sales"
Often called "revenues" or "net revenues"
Cost of goods sold
Often called "cost of sales", includes all expenses directly associated with the production of goods or services the company sells (such as material, labor, overhead, and depreciation). It does not include SG&A.
Accrual accounting
Revenue is recognized at the time of sale, not when the customer pays. Liabilities recognized when liability accrued, not when paid
Management discussion and analysis. One type of formal financial reporting.
Equity financing
Resources contributed to the company by its owners along with any income retained by the company - no legal obligation to repay
Creditor financing
Resources contributed from nonowners - legal obligation to repay
Investing creditors
Those who primarily finance investing activities (such as bank lenders). Obligations are generally interest bearing and legally binding
Operating creditors
Those who primarily finance operating activities (such as suppliers). Obligations are generally non-interest bearing.
Investing activities
acquisition and disposition of assets that a company uses to produce and sell its products and services
Operating assets
resources devoted to executing a company's primary operating activities
Nonoperating (financial) assets
resources devoted to nonoperating activities, excess resources held for future expansion of unexpected needs
Operating activities
The use of company resources to produce, promote, and sell products and services
Input markets
Suppliers of materials and labor
Output markets
Customers of products and services, generate operating revenues (operating sales) to customers. Also generate some
operating expenses such as marketing and distributing products and services to customers
Operating expenses (costs)
Expenses such as inventory, salaries, materials, and logistics
Operating income
(also operating profit or operating earnings)when operating revenues exceed operating expenses.
Contributed capital
net amount contributed by shareholders, includes preferred stock, common stock, and additional paid-in capital
Retained earnings
(falls under earned capital) The amount of income retained in the business and not distributed to shareholders in the form
of dividends. Includes cumulative net income or loss, minus dividends
Earned capital
the combination of retained earnings and accumulated other comprehensive income
Net profit margin
income to sales ratio
Asset turnover
sales to average assets ratio
Market efficiency
Markets are efficient if at any given time current stock prices reflect information that determines those prices.
ROA (Return on Assets)
Net income / average assets


net income / average assets = profit margin x asset turnover
profit margin equation
net income / sales
Asset turnover
sales / average assets

Tells how efficient a company is in generating sales from its assets. The higher the number, the more efficient the company.
Profit Margin
Net income / sales. Net income / revenue. Indicator of profitability. Determined by dividing net income by revenue for the same 12-month period. Result is shown as a percentage.