Business Ch 16

Accounting

The process of recording information and analysing data to prepare financial records
Acid test ratio

A Liquidity ratio calculated by dividing the liquid assets by the current liabilities
Assets

Items that have a monetary value and that are owned by a business
Cost of Sales

Direct costs incurred from the purchase of goods that were sold during a financial year
Final accounts

Financial statements, including the income statement and the statement of financial position used by stakeholders to assist a firms financial position in terms of profitability and performance
Gross profit

sales revenue minus the cost of sales
Gross profit margin

a profitability ratio equal to gross profit divided by sales revenue
Income statement

A financial statement that records revenue, costs, and profits/by losses over a period of time usually one year
Liabilities

Financial obligations and that's of business that need to be repaid
Net assets

the value of total business minus liabilities
non-current assets

assets owned by the firm and used for more thane one year
operating/net profit

the difference gross profit and expenses or business overheads
profit/net profit margin

a profitability ratio measured by dividing the profit before tax by the sales revenue
Profitability ratios

Financial metrics, including gross profit and profit margins,Used To access a firms ability to generate earnings relative to costs and revenues
Reserves

portions of firms profit kept aside to strengthen its financial position
Statement of financial position

An accounting statement prepared at a point in time to record values of assets, liabilities, and shareholders equity
Total equity/total shareholders equity

the value of firm after subtracting liabilities from assets
trading section

the income statement section under which the gross profit is calculated
window dressing

Manipulating the companies accounts to improve its financial performance and prevents its financial position in a favourable man to shareholders and other stakeholders