Term
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Definition
| Obligations due to trade suppliers who have provided inventory or goods and services used in operating the business. Suppliers generally offer payment terms, since the supplier's competition offers payment terms. Whenever possible take advantage of payment terms as this will keep costs down. If the company is paying its suppliers in a timely fashion, days payable will not exceed the terms of payment. |
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Term
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Definition
| Amounts due from others for goods furnished and services rendered. They arise as a result of the process of selling inventory or services on payment terms that allow delivery prior to the collection of cash. Inventory is sold and shipped, an invoice is sent to the customer, and later cash is collected. The receivable exists for the time period between the selling of the inventory and the receipt of cash. Receivables are proportional to sales. As sales rise, the investment in receivables also rises. |
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Term
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Definition
| Obligations owed but not billed (such as wages and payroll taxes) or obligations accruing, but not yet due (such as interest on a loan). Accruals consist chiefly of wages, payroll taxes, interest payable, and employee benefits accruals such as pension funds. As a labor related category, it should vary in accordance with payroll policy (i.e., if wages are paid weekly, the acrrual catergory should seldom exceed one week's payroll and payroll taxes). |
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Definition
| The payment amount required to purchase an asset. This also includes all costs associated with the purchase, such as sales tax, freight, and installation. |
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Definition
| The entire property of a person, association, corporation, or estate applicable or subject to to the payments of debt. |
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Definition
| The expected return on an investment, including interests and dividends, expressed as a percentage. |
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Definition
| A method of inventory valuation whereby the total cost of all units bought or produced is divided by the number of units. |
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Definition
| An accounting statement that shows the amount of a company or individual's assets, liabilities, and net worth on a certain date. |
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Definition
| The total amount of indirect compensation that the business will provide to employees for each forecast year. Benefits are either statutory, such as payroll taxes and worker's compensation; or discretionary, such as health insurance, life insurance, and 401(k) plans. |
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Term
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Definition
| Value of an asset, calculated as actual cost minus allowances for depreciation. Book values can be more or less than market values. |
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Term
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Definition
| The point at which the volume of sales or revenues exactly equals total expenses--the point at which there is neither a profit nor loss-- under varying levels of activity. The break-even point tells the manager what level of output or activity is required before the firm can make a profit; reflects the relationship between costs, volume and profits. |
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Definition
| A detailed statement of anticipated revenues and expenditures during an accounting period. |
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Term
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Definition
| A report showing how much of the cash generated by the business remains after both expenses (including interest) and principal repayment on financing are paid. It indicates whether the business will have cash to pay its expenses, loans, and make a profit. Cash flows can b e calculated for any given period of time, normally done on a monthly basis. |
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Definition
| Money obligated for goods and services received during a given period of time, regardless of when ordered or whether paid for. |
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Term
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Definition
| Money, inventory and equipment that will be used up in the short term- usually within one year. |
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Term
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Definition
| Liabilities due within the next 12 months such as operating notes, the outstanding balance on a credit line, accounts payable, contractual obligations such as leases, principal payments due on fixed liabilities within the next 12 months and unpaid interest that has accrued. |
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Term
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Definition
| Calculated by diving total current assets by total current liabilities. A measure of liquidity, or the ability to pay bills and debts when they come due. |
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Term
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Definition
| A finacial obligation owed to another. |
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Term
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Definition
| The ratio of total debt to owners' equity, used as a measure of leverage and ability to repay obligations. |
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Term
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Definition
| Ratable deduction allowed over a number of years to recover your basis in property that is used more than one year for business or income producing purposes. |
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Term
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Definition
| Expenses, such as labor, overhead, and materials, that vary in direct proportion to units producted or services rendered. |
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Term
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Definition
| A method of recording accelerated depreciation; also called 200% declining balance method. it applies twice the annual straight-line rate to the undepreciated balance of the asset's depreciable cost each year of the asset's useful life. For example, if the asset has a depreciable value of $1,000,000 and a useful life of five years, the double-declining balance method would record $400,000 of depreciation the first year, $240,000 the second year, $131,429 the third year, $114,286 the fourth year, and $114,285 the fifth year. |
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Term
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Definition
| Aggregation of all establishments owned by a parent company. An enterprise can consist of a single, independent establishment or it can include subsidiaries or other branch establishments under the same ownership and control. |
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Term
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Definition
| An accounting term used to describe the net investment of owners or stockholders in a business. Under the accounting equation, equity also represents the result of assets less liabilities. |
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Term
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Definition
| All purchases made by a business, whether in cash or on credit; not equivalent to expenses (also known as costs). |
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Term
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Definition
| An individual's cost or obligation to meet a need or pay a debt. |
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Term
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Definition
| Manufactured product ready for sale; a current asset (inventory) account |
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Term
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Definition
| A period of 12 consecutive month selected by a business entity as its accounting period for reporting and tax purposes; not necessarily a natural business year or calendar year. |
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Term
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Definition
Represented by the use of cash to purchase physical assets whose life exceeds one year. They include assets such as:
- land
- building
- machinary and equipment
- furniture and fixtures
- leasehold improvements
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Term
| Fixed asset to tangible equity ratio |
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Definition
| The ratio of net property, plant and equipment book value to tangible equity, used as a type of efficiency ratio. Typical values for this ratio vary from one industry to another. Higher values for the ratio represent a more capital-intensive compnay, which may be good or bad depending on the industry and how well the assets are being used to generate revenues. |
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Term
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Definition
| Costs of doing business such as rent, utilities, depreciation, taxes, etc., that remain generally the same regardless of the amount of sales of goods or services. |
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Term
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Definition
| The value of a trade or business based on expected continued customer patronage due to its name, reputation, or any other factor. |
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Term
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Definition
| Net Sales less cost of sales (including both fixed and variable costs), often expressed as a percentage of sales (also referred to as gross profit). |
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Term
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Definition
| The total amount received (sales for cash) and amounts expected (sales on credit) in return for products sold or services rendered during the given time period. Gross sales reflect sales at invoicce values, before sales discounts and credit card fees. |
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Term
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Definition
| Excess of revenues and gains over expenses and losses for a period; net income. |
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Term
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Definition
| A financial statement showing a company's sales, expense and net income or loss for a specific period of time. |
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Term
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Definition
Intangibles represent the use of cash to purchase assets with an undetermined life and they may never mature into cash. For most analysis purposes, intangibles are ignored as assets and are deducted from net worth because their value is difficult to determine. Intangibles consist of assets such as:
- Research and development
- Patents
- Market research
- Goodwill
- Organizational Expense
Standard accounting procedures require most intangibles to be expensed as purchased and never capitalized (put on the balance sheet). |
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Term
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Definition
| Used as a basis to price loans with consideration of the riskiness of the individual or operation. The bank's funding, operating cost and required return are reflected also. These factors are then expressed as a percentage for a period of time such as an annual rate. |
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Term
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Definition
| Merchandise that is purchased and/or produced and stored for eventual sale. |
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Term
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Definition
| The expenditure of cash to create additional capital. Investment can be in income-producing vehicles such as stocks and bonds, or more risk-oriented ventures such as the purchase of another company. |
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Term
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Definition
| Service performed by workers for wages. |
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Term
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Definition
| A contract between the owner (lessor) and the tenant (lessee) stating the conditions under which the tenant may occupy or use real estate or equipment. Terms usually include a specific period of time and a predetermined rate. |
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Term
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Definition
| Finacial obligations of a business. There are several categories of liabilities frequently used in agricultural finance (contingent, current, intermediate, and long-term). The liability will normally be secured by assets in similar catergories. For example, current liabilities are normally secured by current assets. |
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Term
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Definition
| Cash, checks, and easily-convertible securities available to meet immediate and emergency needs. |
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Term
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Definition
| Permanent assets with useful lives in excess of 10 years (also called fixed assets but sometimes both intermediate and long term assets are called fixed). |
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Term
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Definition
| The amount a willing buyer will pay for goods, services, a property or a business. |
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Term
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Definition
| A written instrument giving legal title to secure the repayment of a loan made by the mortgagee (lender). There are two types: (1) Title theory- operates as a transfer of the legal title of the property to the mortgagee, and (2) lien theory- creates a lien upon the property in favor of the mortgagee. |
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Term
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Definition
| Total revenues minus total expenses, including taxes and depreciation, for a specified time (also known as profit, net profit, or net earnings). For an individual, it is gross income minus withholdings and expenses. |
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Term
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Definition
| Total revenues minus total expenses except the income tax expense, for a specified time (also known as pretax income). |
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Term
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Definition
| A business condition when total liabilities exceed total assets (negative net worth). |
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Term
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Definition
| Sales revenue less sales discounts and credit card fees. |
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Term
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Definition
| Assets that are not convertible to cash within one year in the normal course of business. Property and goodwill are examples of non-current assets. |
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Term
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Definition
| Obligations that will not come due within one year of the current date. |
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Term
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Definition
| Expenses not related to the ongoing operations of a company; for example, interest expense, one-time events, and taxes. |
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Term
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Definition
| Income not related to the ongoing operations of a compnay; for example, interest income and sale of fixed assets. |
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Term
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Definition
| All expenses related to the ongoing operations of a company, including research and development, sales and marketing, and administrative expenses. Any costs directly attributable to producing goods or services are not included. |
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Term
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Definition
| Sales revenue minus cost of sales and operating expenses. Similar to earnings before interest and taxes, operating income is examined when the earnings of the core business are analyzed (also referred to as operating profit, operating earnings, and income from operations). |
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Term
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Definition
| A type of lease, normally involving equipment, classified as a rental not as a purchase over time. An operating lease must be shown as an expense in the Expenses Detail, unlike a capital lease, which is treated as long term debt. |
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Term
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Definition
| Expenses incurred in operating a business, such as rent, executive salaries, and insurance, which are not directly related to the manufacture of a product or delivery of a service. A portion of overhead can be attributed to cost of sales, usually on a percentage basis; the remainder is considered an operating expense. |
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Term
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Definition
| Assets exclusive of current assets and property, plant and equipment. Other assets can include intangibles, deposits, loans made, and miscellaneous non-current assets. |
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Term
| Non-Entrepreneurship/Personal Expense |
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Definition
| Expenses due to activities outside the normal operations of the business. |
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Term
| Non-Entrepreneurship/Personal Income |
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Definition
| Income due to activities outside the normal operations of the business. |
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Term
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Definition
| Liabilities other than debt, line of credit, and accounts payable, for example, deferred taxes, accrued expenses, and customer deposits. |
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Term
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Definition
| Realtionships of items within and between financial statements, e.g., current ratio, quick ratio, inventory turnover ratio and debt/net worth ratios; expressed in the form of a quotient. |
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Term
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Definition
| Net income for a time period divided by total assets. This ratio is often used to measure profitability or the efficiency with which assets are being employed. Higher values for this ratio indicate better financial performance. The specific value obtained for a business should be evaluated in relation to the returns that can be obtained from alternative investments of capital. |
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Term
| Return on Tangible Equity |
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Definition
| Net income for a time period divided by tangible equity. This ratio is sometimes used to measure profitability or the efficiency with which the owners' finacial investments are being employed. The value of intangible assets such as goodwill is excluded from this ratio in order to better reflect actual operating profitability. Higher values for this ratio indicate better financial performance. The specific value obtained for a business should be evaluated in relation to the returns that can be obtained from alternative investments of capital. An alternative form of this ratio can also be computed using pre-tax income instead of net income. |
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Term
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Definition
| Net income divided by equity. This ratio is often used as a measure of the return on funds invested in a business. |
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Term
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Definition
| The total income received in exchange for goods or services during a specified accounting period. Revenue can be recorded using either the cash basis (as received), or the accrual basis (as earned). It is sometimes referred to as sales or sales revenue. |
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Term
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Definition
| Compensation provided by a business to employees, excluding benefits. On an income statement, Salary refers only to that portion of compensation (such as administrative and management costs) that does not vary in direct proportion to sales. |
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Term
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Definition
| Actual or estimated selling price, net of removal or disposal costs, of a used asset that the business entity expects to sell or otherwise retire. |
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Term
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Definition
| Liabilities that represent money borrowed from banks or other institutions to fund the ongoing operations of a business that will come due within one year. |
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Term
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Definition
| A company's ability to satisfy its obligations to creditors when they are due; A compnay is "technically solvent" if it has enough assets to pay creditors, but cannot liquidate them quickly enough to meet payment deadlines. |
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Term
| Straight-Line Depreciation Method |
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Definition
| If the depreciable life is n periods, the periodic depreciation charge is 1/n of the depreciable cost; results in equal periodic charges. Accountants sometimes call it "straight-time depreciation". |
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Term
| Sum-of-Years' Digits Depreciation (SYD) |
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Definition
| Method of recording accelerated depreciation. Also called the sum-of-digits method, it allows depreciation of an asset based on an inverted scale of the total digits of the asset's useful life. For example, if the useful life is four years, the years' digits (1,2,3, and 4) are summed to produce ten, and 4/10ths of the asset's depreciable cost is recognized as an expense the first year, 3/10ths the second year, and so on. |
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Term
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Definition
| An asset that represents a physical object such as land, furniture, and buidlings. Under accounting rules, a tangible asset must have a useful life greater than one year, and must be used in business operations rather than being helf for resale. The following types of assets are not considered considered to be tangible assets: items held for resale, which are considered to be inventory, cash and other liquid assets which are considered as current assets, and abstract assets such as goodwill, which are intangible assets. |
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Term
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Definition
| Equity less intangible assets. |
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Term
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Definition
| Levies on the annual income of a business imposed by federal and state governments. On the income statement, this figure does not include property taxes, which are considered an operating expense. The contribution required of persons, groups, or businesses within a governmental jurisdiction for the support of governmental programs. |
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Term
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Definition
| An estimate of the period of time over which an asset will be of use to a company. Along with acquisition cost and salvage value, this measure is used to calculate the amount that the asset is depreciated each year. |
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Term
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Definition
| Those costs of doing business, which may occur regularly, such as costs of goods, shipping, handling and storage, sales commissions, etc., and are directly related to the sales of goods or services. |
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Term
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Definition
| Total current assets minus total current liabilities. Cash and short-term assets that can be used for current needs--bills, etc. |
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