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Financial Analysis

Unit 1 - Financial Analysis key terms

TermDefinition
Personal financial statement documents the net worth of the individual or group of individuals responsible for financing the business.
Asset refer to cash and owned items of monetary value.
Current asset refer to cash or those assets that can be converted into cash in a period of one year or less.
Fixed asset those items such as buildings and fixtures that are used for the operation of a business over a long period of time.
Liability refer to debts owed.
Current liability debts to be paid by the business within the fiscal year.
Long-term liability those with a due date beyond a twelve-month time frame.
Balance sheet a business's own personal financial statement.
Equity/net worth a business's total assets (current plus fixed) minus its total liabilities (current + long-term).
Income statement/profit-and-loss statement illustrates a business's path from total sales to net income.
Total/gross sales a historically accurate number (as in total sales for the months of September, October, and November) or a projection (as in estimated sales for the months of December, January, and February).
Net sales the subtraction of total allowances, including those made for returns, shrinkage, and discounts, from gross sales.
Cost of goods sold (COGS) this number comprises all cost associated with buying a product from its point of origin (manufacturer) and getting it to its final selling point (retailer).
Gross profit subtract COGS from net sales to determine this.
Overhead/operating expenses add total variable expenses to total fixed expenses.
Variable expenses those costs that vary from month to month depending on the sales of the business.
Fixed expenses those costs that do not vary by month, such as rent.
Net income from operations to calculate the business's total operating expenses, subtract this number from gross profit.
Net profit/loss before/after taxes determined by adding or subtracting any additional income or expenses to net income from operations. after taxes : determined by subtracting total amount of federal, state, and local taxes from net profit/loss before taxes.
Liquidity ratios measures a business's capacity to pay off its debts.
Activity ratios measures the rate at which a business's assets can be converted into cash.
Profitability ratios measures a business's profits.
Cash flow statement details the flow of cash in to and out of a business.
Created by: ngrant5158