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# Accounting Ch.3

Term | Definition |
---|---|

Acid-Ratio Test | the ratio sum of cash (including temporary cash and investments) and accounts receivable to current liabilities. A primary measure of a firm's liquidity. |

Asset Turnover | the quotient of sales divided by the average assets for the year or other fiscal period. |

COD | cash on delivery, or collect on delivery. |

Credit Risk | the risk that an entity to which credit has been extended will not pay the amount due on the date set for payment. |

Current Ratio | the ratio of current assets to current liabilities. A primary measure of a firm's liquidity. |

DuPont model | an expansion of the return on investment calculation to margin x turnover. |

Interest | the income or expense from investing or borrowing money. |

Interest Rate | the % amount used, together with principal and time, to calculate interest. |

Liquidity | refers to a firms ability to meet its current financial obligation. |

Margin | the % of net income to net sales. Sometimes margin is calculated using operating income or other intermediate subtotals of the income statement. The term can also refer to the amount of gross profit, operating income or net income. |

Principal | the amount of money invested or borrowed. |

Rate of Return | a percentage calculated by dividing the amount of return on an investment for a period of time by the average amount invested for the period. A primary measure of profitibility. |

Return on Assets (ROA) | same as Return on Investment |

Return on Equity (ROE) | the percentage of net income divided by average stockholder's equity for the fiscal period in which the net income was earned; frequently referred to as ROE. A primary measure for a firms profitability. |

Return on Investment (ROI) | a measure of a firms profitibility |

risk | a concept that describes the range of possible outcomes from an action. the greater the range of possible outcomes, the greater the risk. |

Semi logarithmic graph | a graph format in which the vertical axis is a logarithmic scale. |

Trend Analysis | evaluation of the trend of data overtime |

Turnover | the quotient of sales divided by the average assets for the year or some other fiscal period. A measure of the efficiency with which assets are used to generate sales. |

Working Capital | the difference between current assets and current liabilities. A measure of a firm's liquidity. |