Business Finance Vocabulary

a financial statement prepared to provide a detailed analysis of what happened to a company’s cash during a given period of time. This document shows how the business generated and spent its cash by including an overview of cash flows from operating, investing, and financing activities during the reporting period.

• ebitda

• operating cash flow

• cash flow statement

• equity

The opposite of assets, liabilities are what you owe other parties, such as bank debt, wages, and money due to suppliers, also known as accounts payable. There are different types of liabilities, including:

·         Current Liabilities: Also known as short-term liabilities, these are what’s due in the next year

·         Long-Term Liabilities: These are financial obligations not due over a year that can be paid off over a longer period of time

• liabilities

• profit margin

• valuation

• working capital

an important financial statement that communicates an organization’s worth, or “book value.” The balance sheet includes a tally of the organization’s assets, liabilities, and shareholders’ equity for a given reporting period.

·         The Balance Sheet Equation: Balance sheets are arranged according to the following equation: Assets = Liabilities + Owners’ Equity

• assets

• bonds

• capital gain

• balance sheet

This is a market where buyers and sellers engage in the trade of financial assets, including stocks and bonds. Capital markets feature several participants, including:

·         Companies: Firms that sell stocks and bonds to investors

·         Institutional investors: Investors who purchase stocks and bonds on behalf of a large capital base

·         Mutual funds: A mutual fund is an institutional investor that manages the investments of thousands of individuals

·         Hedge funds: A hedge fund is another type of institutional investor, which controls risk through hedging—a process of buying one stock and then shorting a similar stock to make money from the difference in their relative performance

• income statement

• capital market

• depreciation

• cash flow

a financial statement that summarizes a business’s income and expenses during a given period of time. An income statement is also sometimes referred to as a profit and loss (P&L) statement.

• liabilities

• profit margin

• net worth

• income statement

a simple calculation used to determine the expected return of a project or activity in comparison to the cost of the investment, typically shown as a percentage. This measure is often used to evaluate whether a project will be worthwhile for a business to pursue. ROI is calculated using the following equation: ROI = [(Income - Cost) / Cost] * 100

• Return on Investment (ROI)

• valuation

• liquidity

• net worth

Tags

CCSS.7.RP.A.3

a method of spreading an intangible asset's cost over the course of its useful life. Intangible assets are non-physical assets that are essential to a company, such as a trademark, patent, copyright, or franchise agreement.

• assets

• asset allocation

• balance sheet

• amortization

a measure of profitability that’s calculated by dividing the net income by revenue or the net profit by sales. Companies often analyze two types of profit margins:

·         Gross Profit Margin: Which typically applies to a specific product or line item rather than an entire business

·         Net Profit Margin: Which typically represents the profitability of an entire company

• return on investment

• liabilities

• liquidity

• profit margin

Tags

CCSS.6.RP.A.3B

This refers to “interest on interest.” Rather, when you’re investing or saving, compound interest is earned on the amount you deposited, plus any interest you’ve accumulated over time. While it can grow your savings, it can also increase your debt; compound interest is charged on the initial amount you were loaned, as well as the expenses added to your outstanding balance over time.

• cash flow

• EBITDA

• EQUITY

• compound interest

this is the difference between a company’s current assets and current liabilities. Working capital—the money available for daily operations—can help determine an organization’s operational efficiency and short-term financial health.

• working capital

• valuation

• profit margin

• return on investment

Tags

CCSS.L.11-12.4C

CCSS.L.6.4C

CCSS.L.7.4C

CCSS.L.8.4C

CCSS.L.9-10.4C