Introduction to Financial Terms and Concepts

Match the following

• Profit

• The financial gain when revenue exceeds expenses.

• Loss

• The costs incurred by a business in its operations to generate revenue.

• Assets

• When a business's expenses exceed its revenue.

• Expenses

• Resources owned by a business, such as cash, property, or equipment.

• Revenue

• The total amount of money earned by a business from its operations or sales.

Match the following

• Cash Flow

• Debts or obligations the business owes, such as loans or unpaid bills.

• Liabilities

• A financial statement that shows a company’s revenues and expenses over a specific period, indicating profit or loss.

• Balance Sheet

• The movement of money in and out of a business, showing liquidity.

• Income Statement

• A financial statement that shows a company’s assets, liabilities, and equity at a specific point in time.

• Equity

• The owner’s stake in the company, calculated as Assets minus Liabilities.

Match the following

• Cash Flow Statement

• Revenue minus the cost of goods sold (COGS), showing the basic profitability before operating expenses.

• Gross Profit

• Business expenses that remain the same regardless of the level of production or sales, such as rent or salaries.

• Variable Costs

• A financial document that tracks the cash inflows and outflows from operating, investing, and financing activities.

• Fixed Costs

• Costs that vary depending on the business's level of production or sales, like raw materials or utility expenses.

• Break-even Point

• The point where total revenue equals total costs, resulting in no profit or loss.

Match the following

• Return on Investment (ROI)

• The reduction in the value of an asset over time due to wear and tear or obsolescence.

• Operating Expenses

• The process of creating a plan to spend money in order to control finances.

• Depreciation

• The final profit after all expenses, taxes, and costs have been deducted from revenue.

• Budgeting

• The day-to-day costs required to run the business, excluding direct production costs.

• Net Profit

• A measure used to evaluate the efficiency or profitability of an investment, calculated as net profit divided by the cost of the investment.

Match the following

• Capital Expenditure (CapEx)

• The profit a company makes from its core business operations, excluding costs related to non-operating activities (e.g., taxes, interest).

• Liquidity

• The ability of a business to meet its short-term obligations using its most liquid assets (e.g., cash, marketable securities).

• Current Assets

• Funds used by a business to acquire or upgrade physical assets such as property, industrial buildings, or equipment.

• Operating Income

• Obligations that a company needs to settle within a year, such as accounts payable or short-term loans.

• Current Liabilities

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

Match the following

• Capital

• Money owed to a company by its customers for goods or services delivered but not yet paid for.

• Working Capital

• A measure of a company's short-term financial health, calculated as Current Assets minus Current Liabilities.

• Accounts Receivable

• A measure of a company’s financial leverage, calculated by dividing total liabilities by shareholders’ equity.

• Accounts Payable

• Financial assets or the financial value of assets, such as funds held in deposit accounts and/or funds obtained from special financing sources.

• Debt-to-Equity Ratio

• Money a business owes to suppliers or vendors for goods or services received but not yet paid for.

Match the following

• Overhead Costs

• The cost of borrowing money, typically expressed as a percentage of the loan amount.

• Gross Margin

• A portion of a company’s earnings that is distributed to shareholders.

• Interest

• The difference between a company's revenue and its cost of goods sold.

• Dividends

• Ongoing business expenses not directly tied to creating a product or service, such as rent, utilities, and administrative salaries.

• Net Worth

• The total assets minus total liabilities of a company, also referred to as equity or shareholders' equity.

Match the following

• Leverage

• A ratio used to determine how easily a company can pay interest on its outstanding debt, calculated by dividing EBIT (earnings before interest and tax) by interest expenses.

• Return on Assets (ROA)

• A profitability ratio that measures how efficiently a company can manage its assets to produce profits.

• Amortization

• Ratios that provide insights into a company’s financial health, such as liquidity, profitability, and solvency ratios.

• Financial Ratios

• The use of borrowed funds (debt) to increase the potential return of an investment.

• Interest Coverage Ratio

• The process of gradually paying off a debt over time in regular installments of principal and interest.