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Match the Term with Its Definition

Question 81

Matching

Match the term with its definition.

Premises:

Responses:

A financial report showing a firm's sources of cash as well as its uses of cash

Cost of goods sold

Assets that can be converted to cash relatively quickly

Gross profit

Agreements to repay cash amounts borrowed from banks or other lending sources within 12 months or less

Depreciation expense

Sales less the cost of goods sold

Balance sheet

A measure of how efficiently a firm is using its assets to generate sales

Debt ratio

The cost of borrowed money

Cash flow statement

Depreciable assets at their original cost, before any depreciation expense has been taken

Liquidity

Financing provided by creditors

Income statement

Profits as a percentage of sales

Financial leverage

The amount of credit extended to customers that is currently outstanding

Dividend

An accounting method of recording profits when earned and expenses when incurred, whether or not the profits have been received in cash or the expenses paid

Accounts receivable

Earnings after operating expenses but before interest and taxes are paid

Long-term debt

A measure of a firm's profitability relative to the amount of its assets, determined by dividing operating profits by total assets

Accrued expenses

Borrowed money that must be repaid within 12 months

Accounts payable

A measure of the rate of return that owners receive on their equity investment, calculated by dividing net profits by owners' equity

Mortgage

Operating, investing, and financing activities that result in cash inflows or outflows

Cash flow activities

The process of converting inventory to cash

Profits before taxes

Physical assets that will be used in the business for more than one year

Current debt

Earnings after operating expenses and interest expenses but before taxes

Debt

Outstanding credit payable to suppliers

Depreciable assets

An accounting method of recording profits when cash is received and recording expenses when they are paid

Current ratio

Agreements to repay cash amounts borrowed from banks or other lending sources, plus interest, for periods longer than 12 months

Working capital cycle

A distribution of a firm's profits to the owners

Common stock

Profits not paid out as dividends over the life of a business

Accrual-basis accounting

Stock shares that represent ownership in a corporation

Total asset turnover

Gross fixed assets less accumulated depreciation

Return on assets

Owners' investments in a company plus cumulative net profits retained in the firm

Interest expense

Total depreciation taken over time

Financial statements

Earnings that may be distributed to the owners or reinvested in the company

Fixed assets

The impact of financing with debt rather than with equity

Cash-basis accounting

The cost of producing or acquiring goods or services to be sold by a firm

Return on equity

Operating expenses that have been incurred and are owed but not yet paid

Retained earnings

The cost of a firm's building and equipment, allocated over the asset's useful life

Current assets

The degree to which a firm has working capital available to meet maturing debt obligations

Owners' equity

A measure of a company's relative liquidity

Inventory

A measure of what percentage of a firm's assets is financed by debt

Gross fixed assets

Loans from banks or other sources with repayment terms of more than 12 months

Net profits

Assets whose value declines over time

Operating profits

A firm's income statement, balance sheets, and cash flow statements

Profit margins

A long-term loan to purchase a building or land

Net fixed assets

A financial report showing the amount of profits or losses from a firm's operations over a given period of time

Other assets

A measure of how well a firm is controlling its cost of goods sold and operating expenses relative to sales, determined by dividing operating profits by sales

Short-term notes

Long-term notes

Accumulated depreciation

Operating profit margin

Premises:

A financial report showing a firm's sources of cash as well as its uses of cash

Assets that can be converted to cash relatively quickly

Agreements to repay cash amounts borrowed from banks or other lending sources within 12 months or less

Sales less the cost of goods sold

A measure of how efficiently a firm is using its assets to generate sales

The cost of borrowed money

Depreciable assets at their original cost, before any depreciation expense has been taken

Financing provided by creditors

Profits as a percentage of sales

The amount of credit extended to customers that is currently outstanding

An accounting method of recording profits when earned and expenses when incurred, whether or not the profits have been received in cash or the expenses paid

Earnings after operating expenses but before interest and taxes are paid

A measure of a firm's profitability relative to the amount of its assets, determined by dividing operating profits by total assets

Borrowed money that must be repaid within 12 months

A measure of the rate of return that owners receive on their equity investment, calculated by dividing net profits by owners' equity

Operating, investing, and financing activities that result in cash inflows or outflows

The process of converting inventory to cash

Physical assets that will be used in the business for more than one year

Earnings after operating expenses and interest expenses but before taxes

Outstanding credit payable to suppliers

An accounting method of recording profits when cash is received and recording expenses when they are paid

Agreements to repay cash amounts borrowed from banks or other lending sources, plus interest, for periods longer than 12 months

A distribution of a firm's profits to the owners

Profits not paid out as dividends over the life of a business

Stock shares that represent ownership in a corporation

Gross fixed assets less accumulated depreciation

Owners' investments in a company plus cumulative net profits retained in the firm

Total depreciation taken over time

Earnings that may be distributed to the owners or reinvested in the company

The impact of financing with debt rather than with equity

The cost of producing or acquiring goods or services to be sold by a firm

Operating expenses that have been incurred and are owed but not yet paid

The cost of a firm's building and equipment, allocated over the asset's useful life

The degree to which a firm has working capital available to meet maturing debt obligations

A measure of a company's relative liquidity

A measure of what percentage of a firm's assets is financed by debt

Loans from banks or other sources with repayment terms of more than 12 months

Assets whose value declines over time

A firm's income statement, balance sheets, and cash flow statements

A long-term loan to purchase a building or land

A financial report showing the amount of profits or losses from a firm's operations over a given period of time

A measure of how well a firm is controlling its cost of goods sold and operating expenses relative to sales, determined by dividing operating profits by sales

Responses:

Cost of goods sold

Gross profit

Depreciation expense

Balance sheet

Debt ratio

Cash flow statement

Liquidity

Income statement

Financial leverage

Dividend

Accounts receivable

Long-term debt

Accrued expenses

Accounts payable

Mortgage

Cash flow activities

Profits before taxes

Current debt

Debt

Depreciable assets

Current ratio

Working capital cycle

Common stock

Accrual-basis accounting

Total asset turnover

Return on assets

Interest expense

Financial statements

Fixed assets

Cash-basis accounting

Return on equity

Retained earnings

Current assets

Owners' equity

Inventory

Gross fixed assets

Net profits

Operating profits

Profit margins

Net fixed assets

Other assets

Short-term notes

Long-term notes

Accumulated depreciation

Operating profit margin

Correct Answer:

Premises:

Responses:

Cost of goods sold

Gross profit

Depreciation expense

Balance sheet

Debt ratio

Cash flow statement

Liquidity

Income statement

Financial leverage

Dividend

Accounts receivable

Long-term debt

Accrued expenses

Accounts payable

Mortgage

Cash flow activities

Profits before taxes

Current debt

Debt

Depreciable assets

Current ratio

Working capital cycle

Common stock

Accrual-basis accounting

Total asset turnover

Return on assets

Interest expense

Financial statements

Fixed assets

Cash-basis accounting

Return on equity

Retained earnings

Current assets

Owners' equity

Inventory

Gross fixed assets

Net profits

Operating profits

Profit margins

Net fixed assets

Other assets

Short-term notes

Long-term notes

Accumulated depreciation

Operating profit margin