Chapter 16 Key Terms

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Chapter 16 key terms
Megan Hooper
Flashcards by Megan Hooper, updated more than 1 year ago
Megan Hooper
Created by Megan Hooper about 7 years ago
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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 liabilities.
Asset Turnover Net sales divided by total assets.
Assets Things of value owned by a business.
Balance Sheet Financial report 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 data from two or more periods side by side.
Corporation Company with many owners or stockholders. Equity of these owners is called stockholders' equity.
Cost of Merchandise (goods) Sold Beginning inventory + Net purchases - Ending inventory.
Current Assets Assets that are used up or converted into cash with 1 year or operating cycle.
Current Liabilities Obligations of a company due within 1 year.
Current Ratio Current assets divided by current liabilities.
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 performing.
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 (overhead) Regular expenses of doing business. These are not costs.
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.
Purchase Discounts Savings received by buyer for paying for merchandise before a certain time.
Purchase Returns and Allowances Cost of merchandise returned to store due to damage, defects, and so on An allowance is a cost reduction 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) 4 current liabilities.
Ratio Analysis Relationship of one number to another.
Retained Earnings Amount of earnings that is 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 by unpaid.
Sales (not trade) Discounts Reductions in selling price of goods due to early customer payment.
Sales Returns and Allowances Reductions in price or reductions in revenue due to goods returned because of product defects, errors, and so on.
Sole proprietorship A business owned by one person.
Stockholders' Equity Assets less liabilities.
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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