Useful Financial Control & Accounting Terms
L M N O P Q R S T U V W XYZ
Accounts Payables
The total amount owing to suppliers/vendors. Sometimes called trade creditors.
Accounts Payable Days
How to calculate:
| Accounts Payable |
x |
365 Days |
= AP Days |
Annual Purchases |
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Means the number of days, on average, you take to pay suppliers.
Accounts Receivables
The total amount owing by customers, as a result of the sale of goods and/or services, for which payment has not yet been received.
Accounts Receivable Days
How to Calculate:
| Accounts Receivables |
x |
365 Days |
= AR Days |
Annual Revenue |
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This is the number of days, on average, customers are taking to pay.
Accrual Accounting
An accounting method which takes account of income and expenses that have been incurred but not yet paid, as well as expenses that have been paid and income which has been received in a financial period.
Accruals
Costs that are accumulated against profits, but which are not yet due and payable (e.g. taxes and wages).
Acid Test (Quick Asset Ratio)
How to calculate:
| (Current Assets - Inventory) |
Current Liabilities |
Bad Debts
Uncollectible accounts receivable which should be written off.
Balance Sheet
A financial statement showing the nature and amount of any assets, liabilities and capital at a given date. Also called Statement of Financial Position.
Balloon Payment
A final payment extinguishing a debt, (usually Hire Purchase or Finance Leases for Equiptment and Vehicles) in which the amount paid is substantially more than the prior instalments.
Benchmark
A market measurement whish is used as a yardstick to assess risk and performance; usually represents the minimum performance objective.
Book Value
The net dollar value at which the asset is carried in the balance sheet.
Capital Expenditure
Amounts spent for the improvement or acquisition of long-term assets, e.g. Buildings, Equiptment and Vehicles.
Cash flow
Net amount of money received and paid in a period.
Corporate Governance
A generic term covering relationships between all the stakeholders in a company and the management practices, board structures and personnel policies of a company.
Cost of Goods Sold
The total price paid for products sold, including the cost of manufacturing the goods. This includes factory wages, factory rent, electricity and equiptment costs.
Current Assets
Assets which should be converted to cash in the next 12 months.
Current Liabilities
Amounts owing to others which should be paid within the next 12 months.
Days Inventory
How to calculate:
| Inventory |
x |
365 Days |
= Days Inventory |
Annual Revenue |
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This is the number of days, on average, that goods for sale, or raw materials are sitting in your store-room, from when they are delivered by suppliers, to when they are shipped to customers.
Due Diligence
The process of verifying information contained in a statement.
EBIT
Earnings Before Interest and Tax
Fair Market Value
The price at which a buyer and seller agree to conduct a transaction.
Goodwill
An intangible asset of a company, reflecting the value attributed to customer loyalty, reputation etc.
Gross Profit
How to calculate:
| Revenue - Cost of Goods Sold = Gross Profit |
Gross Profit %
How to Calulate:
| Gross Profit |
= Gross Profit % |
Revenue |
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Insolvency
The inability of a company to pay its debts as they fall due.
Inventory
Stock of raw material, work in progress and finished goods.
Leverage
To use an asset for security of a borrowing.
Liabilities
All debts of the company. The opposite of assets.
Liquidity
The ability of the asset to be converted into cash with little or no loss of capital and minimum delay.
Net Profit
The balance remaining after all Expenses or Overheads have been deducted from Gross Profit.
Venture Capital
Capital which may be subject to higher than a normal level of risk, usually associated with a new business.
Working Capital
Reflects the amount necessary to operate your business on a daily basis. Typically this covers or includes Receivables, Stock and Cash on Hand.
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