Financial Terms Flashcards

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Amortization

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Amortization is a method of spreading an intangible asset's cost over the course of its useful life. Intangible assets are non-physical assets essential to a company, such as a trademark, patent, copyright, or franchise agreement.

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Asset

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Assets are items you own that can provide future benefit to your business, such as cash, inventory, real estate, office equipment, or accounts receivable. There are different types of assets, including current assets.

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Current Assets

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Current assets can be converted to cash within a year.

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Fixed Assets

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Tangible items a company owns and uses to generate long-term income; cannot be immediately turned into cash.

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Balance Sheet

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A financial statement that communicates an organization’s worth or “book value,” including assets, liabilities, and shareholders’ equity for a given reporting period.

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The Balance Sheet Equation

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Assets = Liabilities + Owners’ Equity

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Cash Flow

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The net balance of cash moving in and out of a business at a specific point in time, categorized into operating, investing, and financing cash flows.

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Operating Cash Flow

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The net cash generated from normal business operations.

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Investing Cash Flow

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The net cash generated from investing activities, such as securities investments and the purchase or sale of assets.

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Financing Cash Flow

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The net cash generated when financing a business, including debt payments, shareholders’ equity, and dividend payments.