This document defines various accounting and business terminology used in financial reporting and analysis. It provides definitions for 71 key terms including accounting period, assets, liabilities, equity, income, expenses, profits, ratios and other metrics used to evaluate financial performance and position.
2. Any period of time utilised to measure accounting performancewww.lewistaxation.com.au1. Accounting Period
3. Short term financial obligationswww.lewistaxation.com.au2. Accounts Payable (Sundry Creditors)
4. Amounts owed to the firm by customerswww.lewistaxation.com.au3. Accounts Receivable (Sundry Debtors)
5. Acquired by the firm to accomplish its business objectiveswww.lewistaxation.com.au4. Assets
6. The comparison of operating figures from one firm with anotherwww.lewistaxation.com.au5. Benchmarks
7. Sales to cover all variable and fixed expenseswww.lewistaxation.com.au6. B.O.S. (Before Owners’ Salary)
8. Sales to cover all variable and fixed expenseswww.lewistaxation.com.au7. Break – Even Sales
9. Future maintainable profit expressed at a capitalisation rateRate of return required by a prudent investorReflects a mark up on prevailing interest ratesItems which affect rate of return:RiskLack of negotiabilityEconomic conditionswww.lewistaxation.com.au8. Capitalisation Rate
10. Items which affect rate of return (cont’d):Restrictions on entrySize of the share parcelGeneral business riskswww.lewistaxation.com.au8. Capitalisation Rate cont'd...
11. Review your performance during each benchmark periodwww.lewistaxation.com.au9. Comparative Analysis
18. Shows how a business is paying its creditorsCalculated: Creditors Average Daily Credit Purchase = Days Creditors Outstandingwww.lewistaxation.com.au16. Days Creditors Outstanding
20. Percentage of debtors outstanding compared to credit salesDebtors Ratio – calculated:Debtors x 100 Credit Sales 1www.lewistaxation.com.au18. Debtors’ Ratio
21. Amounts owed to the firm by customerswww.lewistaxation.com.au19. Debtors
22. Debtor Ratio to Borrowed FundsWorking Capital Ratio to Borrowed FundsDebt to Equity RatioOther key performance indicators applicablewww.lewistaxation.com.au20. Debt Covenants
23. Percentage of external debt to equityDebt to Equity % - calculated:Total Debt x 100 Equity 1www.lewistaxation.com.au21. Debt To Equity Percentage
24. Record department’s:SalesCost of Goods SoldGross ProfitsTo determine GP% for each departmentwww.lewistaxation.com.au22. Departmental Gross Profit %
25. Costs incurred in producing net profitwww.lewistaxation.com.au23. Expenses
30. Calculated earnings before interest and tax plus principal’s wages, superannuation etcwww.lewistaxation.com.au28. Adjusted EBIT
31. Items owned by the business used to generate business revenuewww.lewistaxation.com.au29. Fixed Assets
32. Fixed Assets as a % of Total Assets – calculated:Fixed Assets x 100 Total Assets 1www.lewistaxation.com.au30. Fixed Assets As A Percentage Of Total Assets
33. Expected profitability after making adjustment for unusual or non recurring items Includes:Reasonable Management Salaries“Notional Rent” on Owned Premiseswww.lewistaxation.com.au31. Future Maintainable Profits
35. Measures gross profit earned on saleswww.lewistaxation.com.au33. Gross Profit % Of Sales
36. Sales - Cost of Goods Sold = Gross Profit, thenwww.lewistaxation.com.au34. Gross Profit Ratio
37. Borrowings expressed as a percentage of assets: Assets worth $100,000 Borrowings $ 62,000Calculated:Assets Worth x 100 Borrowings 1 Gearing is: = 62%www.lewistaxation.com.au35. Gearing
38. Measures increase from previous year. Factors effecting growth includes:CompetitionBusiness PresentationCatchment Area GrowthCustomer Buying HabitsAdvertisingwww.lewistaxation.com.au36. Growth - Sales
39. Original cost of assetswww.lewistaxation.com.au37. Historical Cost
40. Industry group according to the Australian & New Zealand Standard Industry Classification Coding System of the Australian Bureau of Statistics.www.lewistaxation.com.au38. Industry Categories
41. Number of times interest charges are covered by EBITwww.lewistaxation.com.au39. Interest Cover
42. Goods purchased or manufactured for sale to customerswww.lewistaxation.com.au40. Inventory (Stock On Hand)
43. Detailed review and comparison of a business against a “pool of similar businesses”www.lewistaxation.com.au41. Inter Firm Comparisons
44. Amounts owing by the firmwww.lewistaxation.com.au42. Liabilities
45. Ability to pay financial obligationswww.lewistaxation.com.au43. Liquidity
46. Current Assets to Current Liabilitieswww.lewistaxation.com.au44. Liquid Ratio
47. Amounts owed not due for repayment within the next twelve monthswww.lewistaxation.com.au45. Long Term Liabilities
48. People who look like current customers. They are normally the first group of prospects targeted in a marketing campaign.www.lewistaxation.com.au46. Low-Hanging Fruit
49. Amount added to invoice costwww.lewistaxation.com.au47. Mark - Up
50. Amount remaining after cost of goods sold and operating expenses have been deducted from saleswww.lewistaxation.com.au48. Net Profit
51. Operating Profit or Loss after income tax.www.lewistaxation.com.au49. Net Profit After Tax
52. Measures net profit before tax earned on each dollar of saleswww.lewistaxation.com.au50. Net Profit Percentage Of Sales
53. Owner’s Funds as a percentage of total assets – calculated:Owner’s Funds x 100 Total Funds 1www.lewistaxation.com.au51. Owner’s Funds As A Percentage Of Total Assets
55. A measure of output generated from resourceswww.lewistaxation.com.au53. Productivity
56. Net profit after tax divided by total revenue and multiplied by 100.www.lewistaxation.com.au54. Profit Margin
57. Ratio between current assets minus stock and current liabilities minus bank overdraftwww.lewistaxation.com.au55. Quick Ratio
58. The goods shall remain the property of the seller until all monies are paidwww.lewistaxation.com.au56. Romalpa Clause
59. Realistic arms length salaries if external persons were appointedwww.lewistaxation.com.au57. Reasonable Management Salaries
60. Relationship between net profit and total assetsReturn on Assets – calculated:Net Profit x 100 Assets 1www.lewistaxation.com.au58. Return On Assets
61. Relationship between net profit and owner’s equityReturn on Equity – calculated:Net Profit x 100 Equity 1www.lewistaxation.com.au59. Return On Equity (Investment)
62. Net profit after tax as a percentage of shareholder's funds.www.lewistaxation.com.au60. Return On Funds
63. Net profit after tax as a percentage of total revenue.www.lewistaxation.com.au61. Return On Revenue
65. Goods purchased or manufactured to sell to customerswww.lewistaxation.com.au63. Stock On Hand
66. Success of stock management including:DisplaysMixOrdering SystemsStocktakingSecuritywww.lewistaxation.com.au64. Stock Indicators
67. Dissection of sales income into departmental sales and measures income to be contributed from each product groupwww.lewistaxation.com.au65. Sales Mix
68. Describes characteristics of retail store: Average customersAverage items per customerAverage sale per customerTrading daysTrading hoursFloor areaSales per floor area www.lewistaxation.com.au66. Store Profile
69. Shrinkage measures a business' ability to control its margins and pricing. Strong stock management policies will reduce shrinkage. www.lewistaxation.com.au67. Shrinkage
70. Number of times the entire stock is sold and replacedwww.lewistaxation.com.au68. Stock Turnover/Stock Turns
71. Shows ability of a borrower to service the interest cost of a loan out of the business’ profitTimes Interest Covered by Profit – calculated:Profit Before Tax And Interest Interestwww.lewistaxation.com.au69. Times Interest Covered By Profit
72. Based on prior year’s performance:CompetitionManagementBusiness PlanningBusiness ReinvestmentDemographic Informationwww.lewistaxation.com.au70. Trend Analysis
73. Excess of current assets over current liabilitiesCalculated: Current Assets less Current Liabilities = Working Capitalwww.lewistaxation.com.au71. Working Capital