| A | B |
|---|
| inventory | the number and value of teh goods owned by a business |
| financial records | list of money owed and money received |
| physical records | list of items owned by the business |
| net worth statement | shows the financial health of a business at a given point in time, determines the ability for a business to pay all debts by selling all assets |
| assets | items owned by the business and have value |
| liabilities | debt obligations |
| current assets | items owned that will be used up or turned to cash within one year |
| non-current assets | items with useful lives of greater than one year |
| current liabilities | debts due within one year |
| non-current liabilities | debts due after one year |
| income statement | financial instrument that shows the profits or losses of a business over a period of time |
| cash accounting | means that income and expenditures are recorded when they are received or paid |
| accrual accounting | means that income and expenditures are recorded when the service or product is delivered or received, also shows changes in assets and liabilities |
| revenue | cash receipts from services performed, products sold, etc. |
| expenditures | cash paid for services, inputs purchased, etc. |
| net income | revenue minus expenditures |
| cash flow statement | financial report that records the cash receipts and cash expenditures of the business over a period of time, usually for an entire year |
| budget | is a plan |
| whole business budget | plan that looks at all components of the business. |
| enterprise budget | looks at income and expenses related to a particular component of the |
| partial budget | shows the expenses and income related to a possible change in the business/ |
| current ratio | (liquidity) determines the short-run ability to cover debt, total current assets total ÷ current liabilities |
| current debt to worth ratio | compares current liabilities to net worth, total current liabilities ÷ net worth |
| leverage ratio | debt equity ratio (solvency) relates total debt to net worth, total liabilities ÷ net worth |
| net capital ratio | (solvency) measures the ability to pay off all debts, total assets ÷ total liabilities |
| working capital | gives an indication of ability to pay current debts, current assets – current liabilities |
| operating ratio | compares operating expenses to gross income, total operating expenses ÷ gross income |
| fixed ratio | compares fixed expenses to gross income, total fixed expenses ÷ gross income |
| gross ratio | compares total expenses to gross income, total expenses ÷ gross income |
