| Accounting Cycle : |
The procedures for analyzing, recording, classifying, summarizing, and reporting the transactions of a business. |
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| Accounting period : |
A regular period of time, such as a quarter or year, for which a financial statement is produced |
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| Accrued Expense : |
An expense incurred during an accounting period for which payment is not due until a later accounting period. This results from the purchase of services which at the time of accounting have only been partly performed, and are not yet billable, and have not been paid for. |
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| Acquisition : |
Obtaining control of another corporation by purchasing all or a majority of its outstanding shares, or by purchasing its assets. |
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| Assets : |
Economic resources that are owned or controlled by an entity. |
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| Assets Valuation : |
The valuation of an asset is an estimate of its potential price, or better its range of potential prices. It is a guessing game, using more or less sophisticated methods that try to determine what is commonly called its "value" |
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| Audit : |
A yearly examination and verification of the financial statements and records of an organization by an auditor. |
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| Balance Sheet : |
A financial statement that reports the assets, liabilities and equity of an entity as at a particular date. |
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| Bench marking : |
The process of comparing performance against the practices of other leading companies for the purpose of improving performance. Companies also benchmark internally by tracking and comparing current performance with past performance. |
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| Bond : |
A certificate of debt issued to raise funds. Bonds typically pay a fixed rate of interest and are repayable at a fixed date. |
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| Book Value : |
The value of an asset as it appears on a balance sheet, equal to cost minus accumulated depreciation. Book value often differs substantially from market price. |
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| Capital : |
The total amount of money or other resources owned or used to acquire future income or benefits. |
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| Capital Asset Pricing Model : |
A model in which the cost of capital for any security or portfolio of securities equals the risk less rate plus a risk premium that is proportionate to the amount of systematic risk of the security or portfolio. |
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| Capital Budgeting : |
Capital Budgeting is the process of identifying, analyzing and selecting investment projects whose returns (Cash flows) are expected to extend beyond one year. |
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| Capital Market : |
A financial market in which long-term debt obligations and equity securities are bought and sold. |
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| Capital Structure : |
The mix (proportion) of a firm’s permanent long-term financing represented by debt, preferred stock and common stock equity. |
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| Cash Cycle : |
The length of time between a purchase of materials and collection of accounts receivable generated by the sale of the products made from the materials. |
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| Cash inflow : |
Cash flowing into the business from all sources over a period of time. Includes the sale of a farm’s products, new loans received, sale of capital assets etc. |
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| Cash outflow : |
Cash flowing out of the business from all sources over a period of time. Includes the purchase of production inputs, machinery, repayment of borrowed money, etc |
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| Consolidated Statement : |
Financial statement combining the activities of a business and its subsidiaries. |
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| Contingent assets : |
A contingent asset is a possible asset arising from past events whose existence will be confirmed only by the occurrence of one or more uncertain future events. |
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| Contingent Liability : |
A potential obligation of a firm, dependent upon the occurrence of future events. |
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| Corporate strategy : |
Corporate strategy is concerned with a firm’s choice of business, markets and activities’ and it defines the overall scope and direction of the business. |
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| Corporation : |
A form of business organization where the firm has a legal existence separate from that of its owners. Corporations can be privately owned or publicly traded |
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| Cost of Capital : |
The overall cost to an organization of obtaining investment funds, including the cost of both debt sources and equity sources. |
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| Cost of Goods Sold : |
Cost of Goods Sold includes all expenses directly associated with the production of goods or services the company sells (such as material, labor, overhead, and depreciation). |
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| Credit worthiness : |
This is the judgment of an organization which is assessing whether or not to take a particular individual on as a customer. An individual might be considered credit-worthy by one organization but not by another. Much depends on whether an organization is involved with high risk customers or not. |
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| Creditors : |
An individual or institution to whom a debt is owed. |
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| Current Assets : |
Assets that will be used or converted into cash within one year. Current assets are also called liquid assets. |
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| Debt : |
Money borrowed from lenders for a variety of corporate or personal purposes. The borrower pays interest for the use of the money and is obligated to repay the principal amount on a set date. |
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| Debt instruments : |
Investments in which an investor loans money to a government, corporation or financial institution for a pre-determined period of time in exchange for earning a specified rate of interest on the investment. At maturity, the principal (or capital) is returned to the investor along with any unpaid interest owing. |
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| Depreciation : |
The reduction in the balance sheet value of a company asset to reflect its loss of value through age and wear and tear. |
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| Discounted Cash flows : |
The present value of a series of future cash flows. |
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| Dividend : |
The part of a company's post-tax profits distributed to shareholders, usually expressed as an amount per share. |
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| Economic resources : |
The scarce inputs used in the process of creating a good or providing a service; specifically, land, labor, capital, and entrepreneurship. |
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| Economic Value Added : |
A measure of financial performance calculated by taking net operating income and subtracting a charge for the capital used to produce that income (EVA = net operating income - capital charge). |
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| Economics : |
It is the branch of social science that deals with the production and distribution and consumption of goods and services and their management. |
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| Equity : |
Equity is ownership interest in a corporation, represented by the shares of stock which are held by investors. |
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| Expense : |
Costs incurred in the process of earning revenue, these are measured by the cost of goods and services consumed in the operation of a business. |
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| Finance : |
Finance is science of managing financial resources in an optimal pattern. i.e. the best use of available financial resources. |
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| Financial Accounting : |
A major branch of accounting involving the collection, recording and extraction of financial information, and the summary of it in the form of a periodic profit and loss account, a balance sheet and a cash flow statement in accordance with legal, professional, and capital market requirements. |
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| Financial Assets : |
Intangible assets such as Deposits, stocks, bonds, notes, currencies, and other instruments that possess value and give rise to claims, liabilities, or equity investment are called Financial Assets. |
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| Financial Institution : |
An organization that helps to channel funds through an economy by accepting the surplus money of savers and supplying that money to borrowers, who pay to use the money. Commercial Banks and insurance companies are some of the prominent examples of financial institutions. |
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| Financial Ratios : |
Relationships determined from a firm's financial information and used for comparison purposes. Examples include Return-on-Equity (ROE), Return-on-Assets (ROA), Current Ratio, and Debt-to-Equity |
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| Financial Statements : |
These are the reports that summarize a firm's accounting data and indicate its financial condition and financial performance. The four basic financial statements are: the balance sheet, income statement, statement of retained earnings, and statement of changes in financial position. |
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| Firm : |
An institution that buys or hires factors of production and organizes them to produce and sell goods / services. |
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| First in First out : |
Inventory accounting in which the oldest items (those first acquired) are assumed to be the first sold. |
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| Fixed Assets : |
Assets that are used to produce revenue and are not intended for sale, such as office furniture, vehicles, real property, building improvements, and factory equipment. These assets are also called "long-term" assets. |
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| Foreign Exchange : |
Currency and money claims, such as bank balances and bank drafts, expressed in the equivalent value in foreign money. Thus, a pound sterling note is money in Great Britain but is foreign exchange in the US. The term foreign exchange is also used to refer to transactions involving the conversion or transfer of money from one country into the money of a different country. |
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| Gross profit : |
Gross Profit equals Revenue minus Cost of Goods Sold. It identifies the amount available to cover other operating expenses. |
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| Historical Cost : |
The term historical cost describes the original cost of an asset at the time of purchase or payment as opposed to its saleable value, replacement value or value in present or alternative use. |
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| Human Resources : |
Human resources refer to the individuals within the firm, and to the portion of the firm's organization that deals with the hiring, firing, training, and other personnel issues. |
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| Income Statement : |
A financial statement that contains a summary of a business’ financial operations for a specific period of time. It shows the net profit or loss for the period by stating the company's revenues and expenses. |
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| Inflation : |
A rise in the general price level that results in a decline in the purchasing power of money. |
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| Information Technology : |
Information Technology refers to all forms of technology used to create, store, exchange and utilize information in its various forms including business data, conversations, still images, motion pictures and multimedia presentations. |
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| Intangible Assets : |
The assets that do not have any physical or tangible existence. Examples of intangible assets include goodwill, brand value, patents, franchise and trademark. These assets are listed on the consolidated balance sheet of a company. |
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| Internal Rate of Return (IRR) : |
The discount or interest rate at which the net present value of an investment is equal to zero. |
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| International Finance : |
International finance is the branch of economics that studies the dynamics of exchange rates, foreign investment, and how these affect International trade. |
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| International Trade : |
International trade is the exchange of goods and services across international borders. In most countries, it represents a significant share of GDP. |
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| Inventory Management : |
Systems and processes that identify inventory requirements, set targets, provide replenishment techniques and report actual and projected inventory status. |
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| Investment Decision : |
The strategic process of determining the long-term, future costs and benefits of alternative courses of action, which may include a new investment, an additional financial investment in an existing resource, or the abandonment of an existing system or resource. |
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| Investment Portfolio : |
A set of financial assets owned by an individual or an institution for investment purposes. |
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| Investor : |
A person whose principal purpose is to invest money prudently and productively over the longer term with the investment objectives being achievement of a reasonable return and capital appreciation to preserve purchasing power. |
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| Lease : |
A contract between a lessor and a lessee for the use of a vehicle or other property, subject to stated terms and limitations, for a specified period and at a specified payment. |
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| Legal entity : |
A legal entity is a natural person or a legal construct through which the law allows a group of natural persons to act as if it were a single composite individual for certain purposes. The most common purposes are lawsuits, property ownership, and contracts. A legal entity is not necessarily distinct from the natural persons of which it is composed. Most legal entities are simply amalgamations of the persons that make it up for convenience's sake. A legal entity that does have a separate existence from its members is called a company or corporation. |
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| Leverage : |
The use of fixed costs in an attempt to increase (or lever up) profitability. |
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| Liability : |
A financial obligation or debt. |
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| Liquidity ratios : |
Measures a firm's ability to meet maturing short-term obligations. These include current ratio and quick ratio. |
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| Logistics : |
Activities that deal with all aspects of procurement, movement, maintenance, and disposition of supplies, equipment, facilities and personnel and the provision of services. |
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| Market Value Added : |
Market Value Added (MVA) is the difference between the current market value of a firm and the capital contributed by investors. If MVA is positive, the firm has added value. If it is negative the firm has destroyed value. |
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| Marketable Securities : |
Marketable securities are securities that can easily be sold. Securities such as Money Market Instruments that can quickly be liquidated into cash by the owner in the event they need money. |
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| Merger : |
The statutory combination of two or more corporations in which one of the corporations survives and the other corporations cease to exist. |
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| Money Market : |
All financial organizations which deal with the purchase, sale, and transfer of short-term credit instruments and notes constitute money market. |
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| Net Present Value (NPV) : |
The present value of a series of future net cash flows that will result from an investment, minus the amount of the original investment. |
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| Net profit : |
The amount of profit that remains after all the expenses, including interest and taxes has been deducted from the revenues of a firm. |
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| Net Sales : |
Gross sales less allowances for returns and discounts. |
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| Net working Capital : |
Net working Capital is equal to Current assets minus current liabilities. |
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| Nominal Value : |
Sometimes known as par value, this is the face value of a security as opposed to its market value. In the case of a Bond it represents the principal sum due on redemption. |
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| Operating Cycle : |
The average time between purchasing or acquiring inventory and receiving cash proceeds from its sale |
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| Operating Revenue : |
Operating Revenue is that revenue which is realized from the day-to-day operations of the entity, e.g., sales revenue. |
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| Option : |
The right to buy or sell a specific security or property at a specified price within a specified period of time. |
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| Paid in Capital : |
Paid in Capital, as a whole, includes Capital stock + Additional paid in capital.. Capital Stock = Par value of Common Stocks plus Preferred Stocks Additional paid in capital = Paid in capital in excess of par |
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| Partnership : |
A business organization in which two or more persons agree to do business together. |
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| Patent rights : |
A patent is a set of exclusive rights granted by a government to a person for a fixed period of time in exchange for the regulated, public disclosure of certain details of an invention. The person applying for a patent does not need to be the inventor who created or authored the invention. |
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| Portfolio Theory : |
Originally developed by Harry Mark Ovitz in the early 1950's, Portfolio Theory - sometimes referred to as Modern Portfolio Theory - provides a mathematical framework in which investors can minimize risk and maximize returns. The central plank of the theory is that diversifying holdings can reduce risk, and that returns are a function of expected risk |
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| Prepaid Expense : |
A payment made for an input or service prior to the accounting period in which it will be used. |
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| Profit margin : |
The profitability of a company measured by relating profits to revenues. The three most common profit margin calculations are: operating profit margin, pretax profit margin and net profit margin. |
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| Profitability ratios : |
Used to measure how successfully a business earns a return on its investment. |
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| Public Limited Company : |
A listed company whose shares can be bought by the public and whose share capital is not less than a statutory minimum, however not all Public Limited Companies are not listed. |
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| Real Assets : |
The Assets that are tangible or physical in nature such as land, machinery, and livestock |
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| Real Assets: : |
The Assets that are tangible or physical in nature such as land, machinery, and livestock |
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| Residual Value : |
The estimated value of a capital asset at the end of its useful life as determined by application of the Useful Life and Disposal Value Cost Factor. |
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| Retained Earning : |
Retained Earning are accumulated earnings that have not been distributed to shareholders but rather reinvested in the business. Put simply, the net income a company earns, less the dividends it pays, is the net addition to retained earnings for the accounting period. A company's retained earnings are disclosed at or near the bottom of the shareholders equity section of the balance sheet. |
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| Return : |
Realized profit on capital investments or securities stated as an annual percentage rate. |
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| Revenue : |
Revenue is money that the company earns from selling its product or service. |
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| Risk : |
The degree of uncertainty regarding the rate of return on and/or the principal value of an investment. |
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| Share : |
A unit representing a measure of ownership in a corporation. |
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| Short term Debt : |
The portion of debt that is payable within one year. These are listed under current liabilities on the company balance sheet. |
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| Sole proprietorship : |
A sole proprietorship is a business owned and operated by one individual. |
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| Statement of cash flow : |
A financial statement which reports the inflows and outflows of cash for a particular period for the operating, investing and financing activities undertaken by a firm. |
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| Tangible Assets : |
Physical and material assets that have shape and form, and can be touched. Examples are cash, land, and buildings. |
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| Time Value of Money : |
The principle that money received in the present is worth more than the same amount received in the future. The concept, used as the basis for discounted cash flow calculations that cash received earlier is worth more than a similar sum received later, because the sum received earlier can be invested to earn interest in the intervening period. For the same reasons, cash paid out later is worth less than a similar sum paid at an earlier date. |
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| Uncertainty : |
A situation in which a decision maker has neither certainty nor reasonable probability estimates available. |
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| Unlimited Liability : |
A liability of a person to pay all the debts of any business enterprise carried on, not only out of the assets of the business but also, if necessary, out of personal assets. Unlimited liability is incurred by sole proprietors etc. |
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| Unrealized Gain : |
The market value of an unsold asset, compared with the value reported in the financial statements. |
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| Working capital : |
Working capital is the (current) assets of a business enterprise that can be applied to its operation. The difference between a firm's current assets and current liabilities is the net working capital. |
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