A
Made at the end of an accounting period to account for items like accrued expenses, depreciation, and unearned revenue
Adjusting Ratio
Often described as a snapshot of a company’s financial position at a specific point in time.
Balance Sheet
The gradual reduction in the value of a fixed asset (such as machinery, buildings, or vehicles) over time, due to factors like wear and tear, aging, or obsolescence.
Depreciation
The percentage of revenue that exceeds the cost of goods sold (COGS).
Gross Profit Margin
Financial report that shows a company's revenues, expenses, and profits or losses over a specific period
Income Statement
Payments made by a corporation to its shareholders, typically as a distribution of profits.
Dividends
The profit of the company after all expenses, taxes, and interest have been deducted.
Net Income
Other term for Income Statement
Profit and Loss Statement
Profitability ratio that measures how efficiently a company generates profit from its shareholders' equity.
ROE
Uses financial statements for decision-making, budgeting, forecasting, and monitoring the performance of the business. It helps them understand which areas of the business need improvement.
Management
Financial metrics used to evaluate a company's ability to generate profit relative to its revenue, assets, equity, or other financial elements.
Profitability Ratio
The cash flows associated with the core business operations of a company.
Operating Activities
Give the ROE formula
(Net Income/Ave. Sharholder's Equity)x100
Refers to the systematic process of recording, classifying, summarizing, and interpreting financial transactions to ensure that financial data is accurate, consistent, and in compliance with established standards.
Accounting
The total cost a company spends to make the products it sells. This includes the cost of materials, labor, and other expenses directly related to production.
Cost of Good Sold
The summarize the financial activity of a business. The main financial statements are the income statement, balance sheet, and cash flow statement.
Preparing Financial Statement
Refers to the portion of a company’s net income that is kept in the company, rather than being distributed to shareholders.
Retained Earnings
The total revenue a business earns from selling its goods or services minus the cost of goods sold (COGS).
Gross Profit
Formula for Gross Profit Margin
(Gross Profit/Revenue))x100
What are the common ratios?
Profitability Ratio
Liquidity Ratio
Solvency Ratio
Efficiency Ratio
8 User's of Financial Report
Employee
Investor
Management
Public
Government
Creditors (Lenders and Banks)
Customer
Supplier
Compute for ROE:
Net Profit: $500,000
Beginning Shareholder's Equity: $2,000,000
Ending Shareholder's Equity: $2,200,000
23.81%
Compute for ROA:
•Net Income: $120,000
•Current Assets: $915,000.00
•Non-Current Assets: $750,000.00
7.21%
Compute for Gross Profit Margin:
Price: $250.00
Qty Sold: 3,500
Cost of Good Sold: $615,000.00
29.71%
Compute for Gross Profit Margin:
Price: $275.00
Qty Sold: 4,500
Cost of Good Sold: $817,000.00
33.98%