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Chapter 9 Accounting
Term | Definition |
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balance sheet | a report of the balances in the permanent accounts on a specific date |
current assets | the assets that are either used up or converted to cash during the normal operating cycle of the business |
current liabilities | the debts of the business that must be paid within the next accounting period |
current ratio | the relationship between current assets and current liabilities; calculated by dividing current assets by current liabilities |
financial statements | reports prepared to summarize the changes resulting from business transactions that occur during an accounting period |
income statement | a report of the net income or net loss for a specific period |
liquidity ratio | the measure of a business's ability to pay its current debts as they become due and to provide for an unexpected need for cash |
profitability ratio | a ratio used to evaluate the earnings performance of a business during the accounting period |
quick ratio | a measure of the relationship between short-term assets and current liabilities; calculated by dividing the total cash and receivables by the current liabilities |
ratio analysis | the process of evaluating the relationship between various amounts in the financial statements |
report form | a balance sheet that lists classifications one under another |
return on sales | a ratio that examines the portion of each sale dollar that represents profit; calculated by dividing net income by sales |
statement of cash flows | a financial statement that summarizes the cash receipts and cash payments resulting from business activities during a period |
statement on changes in owners equity | a financial statement that summarizes changes in the owner's capital account as a result of business transactions during the period |
working capital | the amount by which current assets exceed current liabilities |