Vocabulary

• Financial Audit – An objective examination and evaluation of a company's financial statements to ensure they are accurate and comply with laws and regulations.
• Auditor – A professional who conducts a financial audit, often a certified public accountant (CPA).
• Balance Sheet – A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time.
• Income Statement – A financial statement showing a company's revenues and expenses over a particular period.
• Cash Flow Statement – A statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, broken down to operating, investing, and financing activities.
• Internal Control – A system within a company designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements.
• GAAP – Generally Accepted Accounting Principles, a common set of accounting principles, standards, and procedures that companies must follow when they compile their financial statements.
• IFRS – International Financial Reporting Standards, a set of international accounting standards that determine how certain types of transactions and other events should be reported in financial statements.
• Materiality – A concept in auditing where an error, omission, or misstatement in the financial statements is considered material if it could influence the economic decisions of users.
• Audit Report – A document prepared by an auditor at the end of the audit process, summarizing their findings, recommendations, and any identified deficiencies.
• Audit Trail – A record that shows who has accessed a company's financial information, what they did, and when.
• Internal Audit – An audit conducted by an internal auditor who is employed by the organization being audited.
• External Audit – An audit conducted by an external auditor who is independent of the organization being audited.
• Revenue Recognition – The process of recognizing income in the financial statements as it is earned, not necessarily when cash changes hands.
• Depreciation – An accounting method of allocating the cost of a tangible asset over its useful life.
• Amortization – The process of gradually writing off the initial cost of an asset over a period of time.
• Accounts Receivable – Money owed to a company by its customers.
• Accounts Payable – Money a company owes to its suppliers.
• Equity – The value of an investment in a business after all liabilities have been subtracted from assets.
• Liabilities – The debts and obligations of a company.
• Assets – Everything a company owns that has monetary value.
• Inventory – A company's goods and materials held for resale.
• Cost of Goods Sold (COGS) – The direct costs attributable to the production of the goods sold in a company.
• Gross Profit – The profit a company makes after deducting the costs associated with making and selling its products.
• Net Profit – The final profit after all business expenses have been deducted from gross profit.
• EBITDA – Earnings Before Interest, Taxes, Depreciation, and Amortization, an indicator of a company's financial performance.
• Working Capital – The difference between a company's current assets and current liabilities.
• Retained Earnings – The portion of a company's profits that are kept or retained and not paid out as dividends.
• Capital Expenditure (CapEx) – Funds used by a company to acquire or upgrade physical assets such as property, buildings, or equipment.
• Operating Expenses (OpEx) – The costs associated with running a business's day-to-day operations.
• Dividends – A distribution of a portion of a company's earnings to its shareholders.
• Shareholders' Equity – The net value of a company, calculated by subtracting total liabilities from total assets.
• ROI – Return on Investment, a measure used to evaluate the efficiency of an investment.
• ROA – Return on Assets, an indicator of how profitable a company is relative to its total assets.
• ROE – Return on Equity, the amount of net income returned as a percentage of shareholders equity.
• Liquidity – The ability of a company to meet its short-term financial obligations.
• Solvency – The ability of a company to meet its long-term financial obligations.
• Debt-to-Equity Ratio – A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets.
• Current Ratio – A liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
• Quick Ratio – A measure of a company's ability to meet its short-term obligations using its most liquid assets.
• Profit Margin – A profitability ratio calculated as net income divided by revenue.
• Operating Margin – A profitability ratio calculated as operating income divided by revenue.
• Gross Margin – A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue.
• EPS – Earnings Per Share, a company's profit divided by the number of common shares outstanding.
• P/E Ratio – Price-to-Earnings Ratio, a valuation ratio of a company's current share price compared to its per-share earnings.
• Leverage – The use of borrowed funds to increase the potential return of an investment.
• Turnover – The number of times an asset is replaced during a financial period.
• Due Diligence – An investigation or audit of a potential investment to confirm all facts.
• Taxation – The means by which governments finance their expenditure by imposing charges on citizens and corporate entities.
• Fiscal Year – A one-year period that companies and governments use for financial reporting and budgeting.