Chapter 16 Key terms

Frage	Antworten
Accounts Payable	Amounts owed to creditors for services or items purchased
Accounts Receivable	Amounts owed by customers to a business from previous sales
Acid Test	Current assets less inventory less prepaid expenses divided by current liabilites
Asset turnover	Net sales divided by total assets
Assets	Things of value owned by a business
Average day's collection	Number of days to collect your receivables
Balance sheet	Financial repot that lists assets, liabilities, and equity. Report reflects the financial position of the company as of a particular date
Capital	Owners' investment in the business
Common Stock	Units of ownership called shares
Comparative statement	Statement showing date from two or more periods side by side
Corporation	Company with many owners or stock-holders. equity of these owners is called stock-holders equity
Cost of merchandise (goods) sold	Beginning inventory + Net purchases - Ending inventory
Current assets	Assets that are used up or converted into cash within 1 year or operating cycle
Current liabilities	Debts or obligations of the company that are due within 1 year
Current ratio	Current assets divided by current liabilites
Expenses	Cost of doing business; found on the income statement
Gross Profit from sales	Net sales - Cost of goods sold
Gross sales	Total earned sales before sales returns and allowances or sales discounts
Horizontal analysis	Method of analyzing financial reports where each total this period is compared by amount of percent to the same total last period
Income statement	Financial report that lists the revenues and expenses for a specific period of time. It reflects how well the company is preforming
Liabilities	Amounts business owes to creditors
Long-term Liabilities	Debts or obligations that company does not have to pay within 1 year
Merchandise Inventory	Cost of goods for resale
Mortgage note payable	Debt owed on a building that is a long-term liability; often the building is the collateral
Net Income	Gross profit less operating expenses
Net purchases	Purchases - Purchase discounts - Purchase returns and allowances
Net sales	Gross sales - Sales discounts - Sales returns and allowances
Operating expenses	Regular expenses of doing business. These are not costs
Owner's equity	The portion of a company's assets that an owner can claim
Partnership	Business with two or more owners
Plant and equipment	Assets that will last longer than 1 year
Prepaid expenses	Items a company buys that have not been used are shown as assets
Profit margin on net sales	Amount of net income as a percent of net sales
Purchase discounts	Savings received by buyer for paying for merchandise before a certain date
Purchase returns and allowances	Cost of merchandise returned to store due to damage defects and so on. An allowance is a cost reductions that results when buyer keeps or buys damaged goods
Purchases	Merchandise for resale; found on the income statement
Quick assets	Current assets - Inventory - Prepaid expenses
Quick ratio	(Current assets - Inventory - Prepaid expenses) / Current liabilities
Ratio analysis	Relationship of one number to another
Retained earnings	Amount of earnings kept in the business
Return on equity	Net income divided by stockholders' equity
Revenues	Total earned sales (cash or credit) less any sales discounts, returns or allowances
Salaries payable	Obligations that a company must pay within 1 year for salaries earned but unpaid
Sales (not trade) discounts	Reductions in selling pice of goods due to early customer payment
Sales returns and allowances	Reductions in price or reductions in revenue due to good returned because of product defects errors and so on. when the buyer keeps the damages goods an allowance results
Sole proprietorship	A business owned by one person
Stockholders' equity	Assets less liabilites
Total debt to total assets	Amount of debt as a percent of total assets
Trend analysis	Analyzing each number as a percentage of a base year
Vertical analysis	Method of analyzing financial reports where each total is compared to one total

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