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Current Liabilities
Obligations that a company resonably expects to pay within the next year or operating cycle, whichever is longer.
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Free cash flow
Cash remaining from operating activities after adjusting for capital expenditures and dividends paid.
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Profitability ratios
Measures of the operating success of a company for a given period of time.
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Securities and Exchange Commission (SEC)
The agency of the U.S. government that oversees U.S. financial markets and accounting standard-setting bodies.
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Monetary unit assumption
An assumption that requires that only those things that can be expressed in money are included in the accounting records.
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Classified balance sheet
A balance sheet that contains a number of standard classifications and sections.
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Full disclosure principle
Accounting principle that dictates that companies disclose circumstances and events that make a difference to financial statement users.
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Relevance
The quality of information that indicates the information makes a difference in a decision.
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Cost principle
An accounting principle that states that companies should record assets at their cost.
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Ratio
An expression of the mathematical relationship betweenn one quantity and another, may be expressed as a percentage, a rate, or a proportion.
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Time period assumption
An assumption that the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared for the business.
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Earnings per share (EPS)
A measure of the net income earned on each share of common stock; computed as net income minus preeferred stock dividends divided by the average number of common shares outstanding during the year.
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Solvency
The ability of a company to pay interest as it comes due and to repay the balance of debt at its maturity.
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Statement of stockholders' equity
A financial statement that presents the factors that caused stockholders' equity to change during the period, including those that caused retained earnings to change.
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Current assets
Cash and other resources that companies reasonably expect to convert to cash or use up within one year or the operating cycle, whichever is longer.
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Conservatism
The approach of choosing an accounting method, when alternatives exist, that will least likely overstate assets and net income.
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Liquidity
The ability of a company to pay obligations that are expected to become due within the next year or operating cycle.
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Ratio analysis
A technique for evaluating financial statements that expresses the relationship among selected financial statement data.
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Debt to total assets ratio
Measures the percentage of total financing provided by creditors; computed as total debt divided by total assets.
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Going concern assumption
The assumption that the company will continue in operation for the foreseeable future.
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Long-term investments
Generally, (1) investments in stocks and bonds of other corporations that companies hold for more than one year, and (2) long-term assets, such as land and buildings, not currently being used in the company's operations
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Generally accepted accounting principles (GAAP)
A set of rules and practives, having substantial authoritative support, that the accounting profession recognizes as a general guide for financial reporting purposes.
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Current ratio
A measure used to evaluate a company's liquidity and short-term debt-paying ability; computed as current assets divided by current liabilities.
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Materiality
The constraint of determining whether an item is large enough to likely influence the decision of an investor or creditor.
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Public Company Accounting Oversight Board (PCAOB)
The group charged with determining auditing standards and reviewing the performance of auditing firms.
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Consistency
Use of the same accounting principles and methods from year to year within a company.
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Working capital
The difference between the amounts of current assets and current liabilities.
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Liquidity ratios
Measures of the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash.
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Comparability
Ability to compare the accounting information of different companies because they use the same accounting principles.
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Financial Accounting Board (FASB)
The primary accounting standard-setting body in the United States.
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Operating cycle
The average time required to go from cash to cash in producing revenues.
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Property, plant, and equipment
Assets with relatively long useful lives that companies use in operating the business and are not intended for resale.
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Economic entity assumption
An assumption that every economic entity can be separately identified and accounted for.
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International Accounting Standards Board (IASB)
An accounting standard-setting body that issues standards adopted by many countries outside of the United States.
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Intangible assets
Assets that do not have physical substance.
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Solvency ratios
Measures of the ability of the company to survive over a long period of time.
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Long-term liabilities (Long-term debt)
Obligations that a company expects to pay after one year.
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Reliability
The quality of information that gives assurance that is free of error, is factual, and is neutral.
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