Archive for the ‘Definitions’ Category

Return on Assets

January 31st, 2013

The ratio of net income (or operating income) to total assets; net income divided by total assets. This ratio is used to evaluate whether a reasonable return has been earned on the assets in business control. It is one way of evaluating the effectiveness of business practices.

Asset Turnover

January 30th, 2013

The ratio of revenues to total assets. It is a measure of the ability of a company to use its assets to sell its products or services. A company with a high asset turnover is more effective in using its assets than one with a low asset turnover.

Statement of Stockholder’s Equity

January 28th, 2013

A financial statement that reports changes in a corporation’s owners’ equity for a fiscal period. Increases come from income and retained earnings as well as additional investments. Decreases come from net losses and withdrawal of investment.

Statement of Cash Flows

January 25th, 2013

A financial statement that reports events that affected a company’s cash account during a fiscal period.

Trial Balance

January 24th, 2013

A Trial Balance provides proof that the ledger is in balance. It is mostly used by bookkeeper and accountants and provides a stepping stone for the preparation of other financial statements.

Income Statement

January 23rd, 2013

A financial statement that reports revenues and expenses for a fiscal period as a means of determining how well a company has performed in creating profit for its owners. Sometimes called a Profit and Loss Statement or P&L.

Balance Sheet

January 22nd, 2013

A financial statement that identifies the company’s assets and claims to those assets by credits and owners at a specific date. The Balance Sheet can change daily – It is a snapshot in time.

Consolidated Financial Statements

January 21st, 2013

A report that includes the activities of the parent company and its subsidiaries as though they were one company. This is rarely used in small businesses.

Financial Statements

January 18th, 2013

Reports that summarize the results of a company’s accounting transactions for a fiscal period.

Accrued Revenue

January 17th, 2013

Revenue recognized prior to the receipt of cash. For example, if you are on accrual basis accounting, you recognize revenue when the client is invoiced, not when the cash is received.