B.8 Financial Statements

Question 1

A financial statement that provides a snapshot of an individual’s or entity’s financial position at a specific point in time, detailing assets, liabilities, and net worth.

Answer 1

Balance Sheet

Question 2

Resources owned that have economic value, expected to provide future benefits.

Answer 2

Assets

Question 3

Obligations or debts owed to others, representing claims against assets.

Answer 3

Liabilities

Question 4

The difference between total assets and total liabilities; represents the owner’s equity.

Answer 4

Net Worth

Question 5

A financial statement that shows income, expenses, and net profit or loss over a specific period.

Answer 5

Income Statement

Question 6

A financial statement that details the inflows and outflows of cash over a period, highlighting operating, investing, and financing activities.

Answer 6

Cash Flow Statement

Question 7

Assets expected to be converted into cash or used up within one year, such as cash, accounts receivable, and inventory.

Answer 7

Current Assets

Question 8

Long-term assets used in operations, not easily converted to cash, like property, plant, and equipment.

Answer 8

Fixed Assets

Question 9

Obligations due to be settled within one year, including accounts payable and short-term loans.

Answer 9

Current Liabilities

Question 10

Debts and obligations not due within the next year, such as mortgages and bonds payable.

Answer 10

Long-Term Liabilities

Question 11

The ability to quickly convert assets into cash without significant loss in value.

Answer 11

Liquidity

Question 12

The ability to meet long-term financial obligations; indicates financial stability.

Answer 12

Solvency

Question 13

The difference between current assets and current liabilities; measures short-term financial health.

Answer 13

Working Capital

Question 14

The systematic allocation of the cost of a tangible fixed asset over its useful life.

Answer 14

Depreciation

Question 15

The gradual repayment of a debt over a period or the allocation of the cost of an intangible asset over its useful life.

Answer 15

Amortization

Question 16

An accounting method where revenues and expenses are recorded when earned or incurred, regardless of when cash is exchanged.

Answer 16

Accrual Accounting

Question 17

An accounting method where revenues and expenses are recorded only when cash is received or paid.

Answer 17

Cash Basis Accounting

Question 18

The owner’s residual interest in the assets after deducting liabilities; also known as owner’s equity or shareholders’ equity.

Answer 18

Equity

Question 19

Accumulated net income retained in the business after dividends are paid; part of equity.

Answer 19

Retained Earnings

Question 20

Total income earned before any deductions or taxes.

Answer 20

Gross Income

Question 21

Total income after all expenses, deductions, and taxes have been subtracted; also known as net profit.

Answer 21

Net Income

Question 22

Expenses incurred during regular business operations, such as rent, utilities, and salaries.

Answer 22

Operating Expenses

Question 23

Expenses not related to core business operations, like interest payments.

Answer 23

Non-Operating Expenses

Question 24

Income generated from normal business activities, typically from sales of goods or services.

Answer 24

Revenue

Question 25

Direct **costs attributable to the production of goods** sold by a company.

Answer 25

Cost of Goods Sold

Question 26

**Revenue minus the cost of goods sold**; indicates the efficiency of production.

Answer 26

Gross Profit

Question 27

**Metrics used to evaluate financial performance**, such as liquidity ratios, profitability ratios, and debt ratios.

Answer 27

Financial Ratios

Question 28

The **process of comparing actual financial performance with budgeted or planned figures** to identify discrepancies.

Answer 28

Variance Analysis

Question 29

**Funds used by an organization to acquire or upgrade physical assets** like property or equipment.

Answer 29

Capital Expenditures