Vocabulary

• Financial Statement – A comprehensive report that details a company's financial performance and health.
• Balance Sheet – A financial statement that shows a company's assets, liabilities, and equity at a specific point in time.
• Income Statement – A financial statement that shows a company's revenues and expenses over a period of time.
• Cash Flow Statement – A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents.
• Notes to the financial statements – Additional information provided in a company's financial report that helps provide a complete understanding of the financial condition of the company.
• Asset – Anything of value that a company or an individual owns.
• Liability – A company's or individual's financial debt or obligations.
• Equity – The remaining interest in the assets of a company, spread among individual shareholders of common or preferred stock.
• Revenue – The income generated from normal business operations and includes discounts and deductions for returned merchandise.
• Expense – The cost incurred in carrying out an organization's day-to-day activities.
• Gross Profit – The profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.
• Net Profit – The amount of income that remains after accounting for all expenses, debts, additional income streams, and operating costs.
• Earnings Before Interest and Taxes (EBIT) – An indicator of a company's profitability, calculated as revenue minus expenses, excluding tax and interest.
• Depreciation – The gradual reduction of the economic value of an asset.
• Amortization – The paying off of debt with a fixed repayment schedule in regular installments over a period of time.
• Dividends – A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
• Retained Earnings – The portion of a company's profit that is held or retained and saved for future use.
• Accounts Receivable – Money owed to a company by its debtors.
• Accounts Payable – Money owed by a company to its suppliers.
• Inventory – A complete list of items such as property, goods in stock, or the contents of a building.
• Current Assets – Assets that a company expects to convert to cash or use up within one year.
• Fixed Assets – Long-term tangible assets that a firm owns and uses in the production of its income and is not expected to be consumed or converted into cash any sooner than at least one year's time.
• Current Liabilities – A company's debts or obligations that are due within one year.
• Long-term Liabilities – Liabilities due beyond a year or the normal operation period of a company.
• Operating Income – The profit realized from a business's operations after deducting operating expenses.
• Operating Expenses – The cost associated with a company's core operations.
• Interest Expense – The cost incurred by an entity for borrowed funds.
• Tax Expense – The income that is lost due to paying taxes.
• Financial Ratios – Mathematical comparisons of financial statement accounts or categories designed to reveal relationships and assist in financial analysis.
• Liquidity Ratios – Financial metrics used to determine a debtor's ability to pay off current debt obligations without raising external capital.
• Solvency Ratios – Key metrics used to measure an enterprise’s ability to meet its debt and other obligations.
• Profitability Ratios – Financial metrics used by analysts and investors to measure and evaluate the ability of a company to generate income (profit) relative to revenue, balance sheet assets, operating costs, and shareholders' equity during a specific period of time.
• Debt Ratios – Financial ratios that measure the extent to which an organization uses debt to fund its operations.
• Equity Ratio – A measure of a company's financial leverage, calculated by dividing total equity by total assets.
• Return on Assets (ROA) – An indicator of how profitable a company is relative to its total assets, calculated by dividing net income by total assets.
• Return on Equity (ROE) – The amount of net income returned as a percentage of shareholders equity, calculated by dividing net income by shareholders' equity.
• Earnings Per Share (EPS) – The portion of a company's profit allocated to each outstanding share of common stock, calculated by dividing net income by the number of outstanding shares.
• Price-to-Earnings Ratio (P/E Ratio) – A valuation ratio of a company's current share price compared to its per-share earnings.
• Book Value – The value of an asset as it appears on a company's balance sheet.
• Market Value – The highest estimated price that a buyer would pay and a seller would accept for an item in an open and competitive market.
• Capital Expenditure (CapEx) – Funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment.
• Operating Cash Flow – A measure of the amount of cash generated by a company's normal business operations.
• Free Cash Flow – A measure of financial performance calculated as operating cash flow minus capital expenditures.
• Leverage – The investment strategy of using borrowed money to increase the potential return of an investment.
• Budget – An estimation of revenue and expenses over a specified future period of time.
• Fiscal Year – A one-year period that companies and governments use for financial reporting and budgeting.
• Auditor's Report – A formal opinion, or disclaimer thereof, issued by an auditor as a result of an audit or evaluation performed on a legal entity or subdivision thereof.
• Financial Analyst – A professional who prepares detailed reports and give investment suggestions based on their research.
• Financial Forecasting – The process of estimating or predicting how a business will perform in the future.
• Financial Modeling – The task of building an abstract representation of a financial decision-making situation.