Financial Terms Glossary

Abundance of Caution
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Terms in this set (33)
= Quick Ratio
-a measure of a company's liquidity
-helps estimate a company's ability to meet current obligations using assets that can easily be converted into cash
-Ratio varies from one industry & company size to another
-Fin. Authorities recommend that the Quick Ratio should be 1.0 or >

Quick Ratio (Acid Test Ratio) =
[Current Assets - (Inventory + Prepaid Expenses)]/
(Current Liabilities)
-rate on loan that may be adjusted (up or down) @ specific intervals -or- one time
-loan documents must state:
(a.) index used to determine adjustment &
(b.) potential frequency of adj.
-Most adj. rate consumer loans = level PMT loans (rates revised quarterly/semi-annually)
-loan rate falls -> installment note paid early
=loan rate rises -> additional ballon payment
After Tax Income= Net IncomeAmortization-reduction of a loan by periodic principal & interest payments applied by a predetermined schedule -recognition of part of an intangible asset's cost as an expense during each year of its UL -items amortized = intangible assets & startup expenses [except Goodwill (FASB disallowed amortization in 2001)]Articles of Incorporation-formal documentation -states purpose of a private corporation -once docs filed & approved by Secretary of State -> firm receives Certificate of Incorporation (grants legal existence)Asset-anything owned having monetary value -anything that has future economic value -can include intangibles s/a GoodwillAverage Annual Return-expressed as % -annual return on an investment (incl. interest & dividends)Average Cost-Inventory Valuation method -(total cost of all units bought -or- produced) / (# of units)Bad Debt Expense (BDE)losses for uncollectible ARBalance Sheet-Financial Statement -Assets, Liabilities, and SE @ a certain point in timeBalloon Payment-lump sum PMT of principle & sometimes accrued interest (typically much larger than monthly PMT), usually due @ end of the term of a loan in which periodic installments of principal & interest end of loan term did not fully amortize the loanBenefits-total amount of indirect compensation provided to employees for each forecast year -either Statutory (s/a payroll taxes & WC) ~or~ Discretionary (s/a health ins., life ins., and 401(k) plans)Billing Cycle# of days btw PMT due datesBook Value-value of an asset for acct purposes -assets where depreciation is taken ~or~ reserves booked -often expressed as "Net Book Value" -BV (Company) = excess of Assets over Liabilities AKA Total Owner's equityBorrower-a person or organization obtaining funds from a lender -normally repayable w/ interest @ a future dateBorrowing Basethe amount of money a lender will loan a company based on the value of the collateral the company pledges; usually determined by a method called margining, in which the lender determines a discount factor that is multiplied by the value of the collateralBreakeven Analysis-analysis tool that models how Revenue, Expenses, and Profit vary w/ changes in Sales Volume -estimates the Sales Volume needed to cover fixed & variable expensesBudgeting-process of determining & recording the expected fin. results of a future period (generally the next fiscal year) -some organizations -> limited to financial terms shown on IS, which in the other budgeting process produces the 3 major statements (IS, BS, and CF statement) -After target time period begins, the budgeting process frequently includes tracking the actual fin. figures against the forecast -considerable overlap between the activities of budgeting & forecasting -usually involves a more detailed account structure and a finer time scale than forecasting, which typically covers between 3-7 years of higher-level projectionsCash & Equivalents= Cash + Investments of very high liquidity & safety (s/a money mkt MFs & T-bills)CF from operationssum (all individual Op. activity CF line items) - Cash realized from Sale of Extraordinary items (s/a Fixed Assets)CF Stfinancial report expressing a company's performance in terms of cash generated & usedCD-receipt of time deposit -issued for a stated time period -normally pays a fixed rate of interest -maturities = as short as 7 days - 7 years or > -pay a mkt rate of interestCharge off-A portion of a loan that the bank considers uncollectible -This amount may be partially or fully recovered in the future -Also called a write-offCollateralasset pledged by the borrower in support of a loanCommercial Letter of Cr-Cr instrument issued by bank guaranteeing payments to a beneficiary for goods sold or services provided -typically not funded unless the borrower fails to perform as agreed w/ the beneficiary