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48 Cards in this Set
- Front
- Back
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The balance sheet 1 (Chapter 11)
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Balance sheet |
a statement that shows the value of a company's assets (= things of positive value) and its debts
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Asset
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Things owned by the company, such as factories, and machines, that will bring future economic benefits. |
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Liabilities |
Obligations to pay other organizations or people: money that the company owes, or will owe at a future date |
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Suppliers |
Companies which provide raw materials or parts |
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Granting credit |
If the suppliers have given the buyer a period of time before they have to pay for the goods |
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Assets = liabilities + capital |
A = L + C |
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Shareholders' equity |
Consists of all the money belonging to shareholders |
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Shareholder |
a person who owns shares in a company and therefore gets part of the company's profits and the right to vote on how the company is controlled:
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Share capital |
The money the company raised by selling its shares. |
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Retained earnings |
Profits from previous years that have not been distributed - paid out to shareholders - as dividends |
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Dividend |
(a part of) the profit of a company that is paid to the people who own shares in it
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Profit and loss account & Cash flow statement |
Shows how much money a company has spent or received during a year. |
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The balance sheet 2: Assets (Chapter 12) |
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Fixed assets or non-current assets |
Such as buildings and equipment, that will be used by a business for a long time. |
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Current Assets |
Things that will probably be used by the business in the near future. They include cash - money available to spend immediately. |
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Write off |
If a company thinks a debt will not be paid, it has to anticipate the loss - take action in preparation for the loss happening. It will write off or abandon the sum as bad debt. |
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Tangible assets |
Assets with a physical existence- things you can touch- such as property, plant, and equipment. |
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Accumulated depreciation charges |
The amount of their cost the already been deducted from profits = net book value. |
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Intangible assets |
brand names and trademarks |
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The balance sheet 3: Liabilities (Chapter 13) |
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Current Liabilities |
are expected be paid within a year of the date of the balance sheet |
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Share premium & face value |
Share premium: money made if the company sells shares at above their face value - the value written on them. |
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The other financial statements (chapter 14) |
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Profit and loss account |
The is a financial statement which shows the difference between the revenues and expenses of a period. |
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surplus |
If there is more income than expenditure |
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Total sales |
The amount of money received during a specific period. |
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Cost of goods sold |
The costs associated with making the products that have been sold, such as raw materials, labour, and factory expenses. |
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Gross Profit |
The difference between the sales revenue and the cost of sales |
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EBITDA (earnings before interest, tax, depreciation, and amortization) |
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EBIT (earnings before interest tax) |
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Net Profit |
After all the expenses and deductions, also called the bottom line. |
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Cash flow statement |
Gives details of cash flows- money coming into and leaving the business, relating to: operations, investing, financing |
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Financial ratios 1 (Chapter 15) |
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Liquidity |
How easily a company can turn some of its assets into cash |
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Current ratio |
Current assets / current liabilities It measures liquidity and shows how much of a company's assets will have to be converted into cash in the next year to pay debts. The higher the ratio, the more chance creditors have of being paid. A healthy company should have a current ratio closer to 2 than to 1. |
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Quick ratio or acid test |
liquid assets / current liabilities It measures short term solvency |
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Earnings per share (EPS) |
total earnings per year / the number of ordinary shares It tells investors how much of the company's profit belongs to each share. |
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Price/earnings ratio or P/E ratio |
the market price of an ordinary share / the past year's EPS It shows how expensive a share is |
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Dividend cover |
ordinary share dividend / net profit Shows how many times the company's total annual dividends could have been paid out of it's available annual earnings . |
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Financial ratios 2 (Chapter 16) |
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Gross profit margin |
gross profit (sales - cost of goods sold) / sales The money a company has left after it pays the cost of goods or services it has sold. |
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Return on assets |
Net profit / total assets Measures how efficiently the firm's assets are being used to generate profits. |
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Return on equity (ROE) |
net profit / shareholders equity It shows how big a company's profit is (after interest and tax) compared with the shareholders' equity or funds. |
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leverage |
debt / shareholders equity often expressed as a percentage. It shows how far a company is funded by loans rather than its own capital. |