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Chapter Seven
The Balance Shee: Its Content and Use
25
Accounting
Undergraduate 1
10/06/2009

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Term
Balance Sheet
Definition
A financial statement that reports the types and the monetary amounts of a compnay's assets, liabilities, and owner's equity on a specific date.
Term
Classified Balance Sheet
Definition
The balance sheet shows subtotals for asets, liabilities, and owner's equity in related groupings.
Term
Assets
Definition
A company's economic resources that it expects will provide future benefits to the company.
Term
Current Assets
Definition
Cash and other assets that the company expects to convert into cash, sell, or use up within one year.
Term
Long-term Investments
Definition
Include items such as notes receivable, government bonds, bonds and capital stock or corporations, and other securities.
Term
Property and Equipment
Definition
Includes all the pysical, long-term assets used in the operations of a company.
Term
Book Value
Definition
The original cost of an asset minus the related accumulated depreciation.
Term
Accumulated Depreciation
Definition
The total amount of depreciation expense recorded over the life of an asset to date; thus, it is the portion of the asset's cost that has been "used up" to earn revenues to date.
Term
Liabilities
Definition
Are the economic obligations (debts) of a company.
Term
Current Liabilities
Definition
Obligations that the company expects to pay within one year by using current assets.
Term
Noncurrent Liabilities
Definition
Obligations that a company does not expect to pay within the next year.
Term
Owner's Equity
Definition
The owner's current investment in the assets of the company.
Term
Liquidity
Definition
A measure of how quickly a company can convert its assets into cash to pay its bills.
Term
Working Capital
Definition
A company's current assets minus its current liabilities.
Term
Current Ratio
Definition
Shows the relationship between current assets and current liabilities and is probably the most commonly used indicator of a company's short run liquidity.
Term
Quick Ratio
Definition
A more convincing indicator of a company's short-term debt-paying ability.
Term
Financial Flexibility
Definition
The ability of a company to adapt to change.
Term
Debt Ratio
Definition
Shows the percentage of total assets provided by creditors and is calculated as follows.
Term
Return on Total Assets
Definition
The amount of net income earned compared with total assets which shows whether a company used its economic resources efficiently.
Term
Inventory Turnover
Definition
Shows the number of times the company turns over (or sells) the inventory during that period.
Term
Operating Capability
Definition
Refers to a company's ability to sustain a given level of operations.
Term
Inventory Turnover
Definition
Shows the number of times the company turns over (or sells) the inventory during that period.
Term
Number of Days in the Selling Period
Definition
How long it takes a company to sell its inventory.
Term
Accounts Receivable Turnover
Definition
Shows how many times the average receivable turns over (is collected) each period.
Term
Number of Days in the Collection Period
Definition
The average time it takes the company to collect its accounts receivable.
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