The Language of Business
System for measuring and summarizing business activities, interpreting financial information, and communicating the results to management and other decision makers.
The positive difference between revenues and cost of goods sold.
An accounting system that records transactions when they occur, regardless of when cash is paid or received.
accrual accounting
Financial statement showing income for more than one year.
True or False
Gross profit is the money that a company has earned after paying all its expenses.
Parties who are interested in the activities of a business because they’re affected by them.
A financial statement that details changes in owner’s equity for a specified period of time.
Goods that a business has made or bought and expects to sell in the process of normal operations.
A financial ratio showing how much of each sales dollar is left after certain costs are covered.
_____ is the same thing as the item called net profit on an income statement.
Revenue
Gross margin
The bottom line
Net worth
Branch of accounting that provides information and analysis to decision makers inside the organization to help them operate the business.
Method of determining the level of sales at which the company will break even (have no profit or loss).
Record of cash that will be received from a customer to whom a business has sold products on credit.
A financial ratio showing the relationship between a company’s current assets and current liabilities.
Its _____ ratio indicates that a company is making a reasonable profit on its sales even though its profitability is declining.
management efficiency
management effectiveness
product life cycle
profit margin
Branch of accounting that furnishes information to individuals and groups both inside and outside the organization to help them assess the firm’s financial performance.
The financial statement summarizing a business’s revenues, expenses, and net income.
Record of cash owed to sellers from whom a business has purchased products on credit.
A relationship between a company’s debt (funds acquired from creditors) and its equity (funds invested by owners).
The _____ ratio may suggest that inventory is moving quickly even though the rate of turnover is slowing.
profit margin
management effectiveness
management efficiency
financial control
A set of worldwide accounting rules and guidelines used by companies to prepare financial statements that can be compared with those of other countries.
International Financial Reporting Standards (IFRS)What are generally accepted accounting principles (GAAP)?
Report on a company’s assets, liabilities, and owner’s equity at a specific point in time.
Financial statement reporting on cash inflows and outflows resulting from operating, investing, and financing activities.
A financial ratio showing the relationship between debt (funds acquired from creditors) and equity (funds invested by owners).
Its _____ ratio may tell us that a company generated an excellent return on assets in its first year and a good return in its second year.
management effectiveness ratio
management efficiency ratio
profit margin ratio
financial condition ratio