Finance vs. Accounting
This business function ensures the organization has enough money to operate day-to-day.
What is finance?
This term refers to cash coming into the business.
What are cash inflows?
This cost does not change with the level of output.
What is a fixed cost?
This appraisal method expresses average annual profit as a percentage of initial investment.
What is ARR (Average Rate of Return)?
This financial statement shows a firm’s profit or loss over a period of time.
What is the income statement?
This business function records, organizes, and reports financial transactions.
What is accounting?
This term refers to a firm's ability to meet its short-term obligations.
What is liquidity?
This term is calculated as price per unit minus variable cost per unit.
What is contribution per unit?
This measure tells you how long it takes for an investment to repay its initial cost.
What is the payback period?
This profit figure is calculated as revenue minus COGS.
What is gross profit?
These formal documents are produced by accounting at the end of a financial period.
What are the final accounts?
This liquidity ratio removes inventory from current assets to give a more cautious measure.
What is the acid-test ratio?
This point on a graph shows where total revenue equals total costs.
What is the break-even point?
In a decision tree, this is calculated by multiplying an outcome value by its probability.
What is expected value?
This must always remain balanced: Assets = Liabilities + Equity.
What is the accounting equation?
This department uses accounting data to make decisions about budgeting, investment, cash flow, and funding.
What is the finance department?
This problem occurs when a profitable company cannot pay its immediate bills because it lacks cash.
What is a liquidity problem?
This type of cost increases directly with output.
What is a variable cost?
The financially preferred option in a decision tree is the one with this measure highest.
What is net expected value?
This financial statement shows assets, liabilities, and equity at a specific point in time.
What is the balance sheet?
This equation is shown as Assets = Liabilities + Equity.
What is the accounting equation?
This figure is calculated as cash inflows minus cash outflows.
What is net cash flow?
This formula determines the quantity a firm must sell to avoid a loss.
What is fixed costs ÷ contribution per unit?
This marking is used to indicate the option rejected in a decision tree.
What are the two diagonal lines (//) drawn through the rejected branch?
This figure represents the owner’s claim on the business after liabilities are subtracted from assets.
What is equity?