Accounting Basics
What is a Balance Sheet?
This financial statement shows a company's assets, liabilities, and equity at a specific point in time.
What is maximizing shareholder wealth?
The primary goal of financial management in a public corporation.
What is a stock?
A share of ownership in a corporation.
What is the Current Ratio?
Calculated as Current Assets divided by Current Liabilities, this ratio measures a company's ability to pay its short-term obligations.
What is Wall Street?
This famous street in New York City is the heart of the American financial system.
What is the Accrual Principle?
The principle that requires revenues to be recorded when they are earned, not when cash is received.
What is profit?
What is left after you subtract a company's costs from its revenue.
What is a bond?
A type of investment that represents a loan made by an investor to a borrower, such as a company or government.
What is the Net Profit Margin?
This ratio indicates how much profit a company makes for each dollar of sales (Net Income / Revenue).
What is the U.S. Dollar?
The official currency of the United States.
What is an intangible asset?
An asset that is not physical in nature, such as a patent, trademark, or copyright.
What is capital structure?
The mix of debt and equity used by a company to finance its assets.
What is diversification?
The practice of spreading investments across various assets to reduce risk
What is a credit score?
This three-digit number shows how responsible you are with money
Who is Benjamin Franklin?
His face is on the $100 bill, and he was one of America's Founding Fathers.
What is inflation?
This is the term for when your money buys less than it used to, and the general prices of goods and services are rising.
What is the cost of capital?
The rate of return a company must earn on an investment to maintain the value of its stock.
What is a bull market?
This type of market is characterized by rising stock prices and investor optimism.
What is the Debt-to-Asset Ratio?
This ratio measures how much debt a company is using to finance its assets (Total Debt / Total Assets).
Who is Warren Buffett?
A famous billionaire investor known as the "Oracle of Omaha."
What is the Consumer Price Index (CPI)
This is a common measure of inflation that tracks the average change in prices paid by consumers for a basket of goods and services.
What is a dividend?
A payment that a company makes to its shareholders from its profits.
What is a mutual fund?
A pool of money collected from many investors to invest in a diversified portfolio of stocks, bonds, and other assets.
What is Return on Assets (ROA)?
This profitability ratio, calculated as Net Income divided by Total Assets, measures how effectively a company is using its assets to generate earnings.
What is the New York Stock Exchange (NYSE)?
The largest stock exchange in the world, located on Wall Street.