Important finance terms Part 2

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A summary of the financial balances of an individual or organisation. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year.

A company's financial statements showing the company’s revenues and expenses during a particular period.

A comprehensive report on a company's activities and financial performance throughout the preceding year for shareholders and other interested people. It includes balance sheet and income statement.

The current worth of a future sum of money or stream of cash flows given a specified rate of return. Formula: PV = FVt / (1 + r)t

The value of a current asset at a specified date in the future based on an assumed rate of growth over time. Formula: FVt = PV(1+r)t

Cash and other assets on balance sheet that are expected to be converted to cash within a year. Examples: cash, accounts receivable, inventory, marketable securities, prepaid expenses

A company's debts or obligations on the balance sheet that are due within one year. Examples: short term debt, accounts payable, accrued liabilities and other debts.

A business created as a distinct legal entity composed of one or more individuals or entities.

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A commercial enterprise undertaken jointly by two or more parties that otherwise retain their distinct identities.

A business with one owner who pays personal income tax on profits from the business. It's easy to set up since there is little government regulation.

A business or firm owned and run by two or more partners.

This is the primary goal of financial management.

The market value of a firm is determined by its earning power and the risk of its underlying assets, and is independent of the way it chooses to finance its investments or distribute dividends.

The interest rate you are charged if you go overdrawn on your current account. Also known as the Effective Annual Interest Rate (EAR). r = ( 1 + i n ) n − 1

An investment should be acceptable if its discounted payback is less than some pre-specified number of years.