Business Foundations Ch 7

Front 1

accounting equation

Back 1

the basis for the accounting process: assets = liabilites + owners' equity

Front 2

accounting

Back 2

the process of systematically collecting, analyzing, and reporting financial information

Front 3

accounts receivable turnover

Back 3

a financial ratio calculated by dividing net sales by accounts receivable

Front 4

acid-test ratio

Back 4

a financial ratio calculated by adding cash, marketable securities, and receivables and dividing the total by current liabilities

Front 5

annual report

Back 5

a report distributed to stockholders and other interested parties that describes a firm's operating activities and its financial condition

Front 6

assets

Back 6

the resources that a business owns

Front 7

audit

Back 7

an examination of a company's financial statements and the accounting practices that procured them

Front 8

balance sheet (or statement of financial position)

Back 8

a summary of the dollar amounts of a firm's assets, liabilities and owners' equity accounts at the end of a specific accounting period

Front 9

certified management accountant (CMA)

Back 9

an accountant who has met the requirements for education and experience, passed a rigorous exam, and is certified by the Institute of Management Accountants

Front 10

certified public accountant (CPA)

Back 10

an individual who has met state requirements for accounting education and experience and has passed a rigorous accounting examination prepared by the AICPA

Front 11

debt-to-owner's-equity ratio

Back 11

a financial ratio calculated by dividing total liabilities by owners' equity

Front 12

current assets

Back 12

assets that can be converted quickly into cash or that will be used in one year or less

Front 13

current liabilities

Back 13

debts that will be repaid in one year or less

Front 14

depreciation

Back 14

the process of apportioning the cost of a fixed asset over the period during which it will be used

Front 15

intangible assets

Back 15

assets that do not exist physically but that have a value based on the rights or privileges they confer on a firm

Front 16

inventory turnover

Back 16

a financial ratio calculated by dividing the cost of goods sold in one year by the average value of the inventory

Front 17

liabilities

Back 17

a firm's debts and obligations

Front 18

liquidity

Back 18

the ease with which an asset can be converted into cash

Front 19

long-term liabilities

Back 19

debts that need to be repaid for at least one year

Front 20

managerial accounting

Back 20

provides managers and employees with the information needed to make decisions about a firm's financing, investing, marketing, and operating activities

Front 21

double-entry bookkeeping system

Back 21

a system in which each financial transaction is recorded as two separate accounting entries to maintain the balance shown in the accounting equation

Front 22

earnings per share

Back 22

a financial ratio calculated by dividing net income after taxes by the number of shares of common stock outstanding

Front 23

financial accounting

Back 23

generates financial statements and reports for interested people outside the organization

Front 24

financial ratio

Back 24

a number that shows the relationship between to elements of a firm's financial statements

Front 25

fixed assets

Back 25

assets that will be held or used for a longer period longer than one year

Front 26

generally accepted accounting principles (GAAPs)

Back 26

an accepted set of guidelines and practices for companies reporting financial information for the accounting profession

Front 27

gross profit

Back 27

a firm's net sales less the cost of goods sold

Front 28

gross sales

Back 28

the total dollar amount of all goods and services sold during the accounting period

Front 29

income statement

Back 29

a summary of a firm's revenues and expenses during a specified accounting period

Front 30

net income

Back 30

occurs when revenues exceed expenses

Front 31

net loss

Back 31

occurs when expenses exceed revenues

Front 32

net sales

Back 32

the actual dollar amounts received by a firm for the goods and services it has sold after adjustment for retuns, allowances, and discounts

Front 33

operating expenses

Back 33

all business costs other than the cost of goods sold

Front 34

owners' equity

Back 34

the difference between a firm's assets and its liabilities

Front 35

personal budget

Back 35

a specific plan for spending your income

Front 36

retained earnings

Back 36

the portion of a business's profits not distributed to stockholders

Front 37

return on owners' (stockholders') equity

Back 37

a financial ratio calculated by dividing net income after taxes by owners' equity.

Front 38

return on sales (or profit margin)

Back 38

a financial ratio calculated by dividing net income after taxes by net sales

Front 39

revenues

Back 39

the dollar amounts earned by a firm from selling goods, providing services, or performing business activities

Front 40

statement of cash flows

Back 40

a statement that illustrates how the company's operating, investing, and financing activities affect cash during an account period

Front 41

working capital

Back 41

the difference between current assets and current liabilities

Front 42

cost of goods sold

Back 42

the dollar amount equal to beginning inventory plus net purchases less ending inventory

Front 43

current ratio

Back 43

a financial ratio computed by dividing current assets by current liabilities