Financial Statement Analysis Essentials Flashcards
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Terms in this set
- Revenue Income earned from the sale of goods or services in the ordinary course of business — the top line of the income statement.
- Expenses Costs incurred in earning revenue, reducing net income; matched to the period in which the related revenue is recognized.
- Goodwill An intangible asset arising when one company acquires another for more than the fair value of its identifiable net assets.
- Accruals Recognition of revenues earned or expenses incurred but not yet received or paid in cash.
- Depreciation The systematic allocation of a tangible asset's cost over its useful life.
- Inventory Goods held for sale in the ordinary course of business, valued using FIFO, LIFO, weighted average, or specific identification.
- Receivables Amounts owed to a firm by customers for goods or services delivered on credit.
- Leverage The use of debt to finance assets — magnifying both returns on equity and the risk borne by equity holders.
- Liabilities Present obligations of an entity to transfer economic resources, settled in cash, goods, services, or other assets.
- Solvency A firm's ability to meet long-term obligations — commonly measured by debt-to-equity, debt-to-assets, or interest coverage ratios.