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A written report which quantitatively describes the financial health of a company. Financial statements are usually compiled on a quarterly and annual basis.

Profits generated by a company that are not distributed to stockholders as dividends but are either reinvested in the business or kept as a reserve for specific objectives (such as to pay off a debt or purchase a capital asset).

Money committed or property acquired for future income. There are two main classes of investment they are Fixed income investment and Variable income investment.


The financial statement that reports the sources and uses of cash or working capital for a specific period of time, normally a year.


The accounts for a company showing expenditure and income over a period of time, usually one calendar year, balanced to show a final profit or loss. Also called consolidated profit and loss account, P&L statement.


A document generated monthly and/or annually that reports the earnings of a company by stating all relevant income and all expenses that have been incurred to generate that income. Also referred to as a profit and loss statement.

Net income

Net income is the residual income of a firm after adding total revenue and gains and subtracting all expenses and losses for the reporting period. Net income can be distributed among holders of common stock as a dividend or held by the firm as an addition to retained earnings


A profit which is not paid as dividend but is taken over into the accounts of the following year.


A taxable payment declared by a company's board of directors and given to its shareholders out of the company's current or retained earnings, usually quarterly. Dividends are usually given as cash, but they can also take the form of stock or other property.


It is a statement of the total assets and liabilities of an organization at a particular date - usually the last date of an accounting period.

Business transactions are recorded on certain assumptions such as going concern, dual concept, etc. these postulates or assumptions are reflected in the financial statement.



A judgment rendered against an individual (or corporation) for the payment of money damages.


A person or company to whom one owes money. A creditor may be a bank or another company. In the case of bonds and personal debt, the creditor is often an individual.

An investor is a party that makes an investment into one or more categories of assets equity, debt securities, real estate, currency, etc. with the objective of making a profit.


Financier is a term for a person who handles typically large sums of money, usually involving money lending, large-scale investing, or large-scale money management.


A party that possesses the exclusive right to hold, use, benefit-from, enjoy, convey, transfer, and otherwise dispose of an asset or property.


A self-employed owner of an unincorporated business (called a proprietorship), or an owner of real estate.


The deceptive practice of using accounting tricks to make a company's balance sheet and income statement appear better than they really are.


The combining of two or more entities into one, through a purchase acquisition or a pooling of interests. Differs from a consolidation in that no new entity is created from a merger.


The merging of two or more businesses into single entity.


Unsecured debt backed only by the integrity of the borrower, not by collateral, and documented by an agreement called an indenture. One example is an unsecured bond.


Acquiring control of a corporation, called a target, by stock purchase or exchange, either hostile or friendly. It is also called takeover.


The fee charged by a lender to a borrower for the use of borrowed money, usually expressed as an annual percentage of the principal; the rate is dependent upon the time value of money, the credit risk of the borrower, and the inflation rate.


Solvency, in finance or business, is the degree to which the current assets of an individual or entity exceed the current liabilities of that individual or entity.


It is based on published financial statement of a firm. Outsiders have limited access to internal records of the firm.


Internal analysis is done on the basis of internal and unpublished records. It is done by the executives or other authorized officials.


The assessment of financial statements where you take the total number of sales and convert the number to a percentage of goods sold.

A procedure in fundamental analysis in which an analyst compares ratios or line items in a company's financial statements over a certain period of time.


The study and interpretation of the relationships between various financial variables, by investors or lenders.


Working capital measures how much in liquid assets a company has available to build its business. The number can be positive or negative, depending on how much debt the company is carrying.


Gross working capital is the total cash, and cash equivalents, that a business has on-hand.


Net Working Capital, is defined as Current Assets minus Current Liabilities.


A comparative analysis of a company's financial ratios over time.


Inflation is a rise in the general level of prices of goods and services in an economy over a period of time.


These are a special kind of shares, the holders of such shares enjoy priority, both as regards to the payment of a fixed amount of dividend and repayment of capital on winding up of the company.


General Reserve is the part of reserve amount kept by the company out of its profits for future purpose.


When Business activity is started, there are expenses relating to formation of the company, stamp duty, registration fees, incidentals which do not relate to the business activity.


An income statement figure which reflects the cost of obtaining raw materials and producing finished goods that are sold to consumers. Cost of Goods Sold = Beginning Merchandise Inventory + Net Purchases of Merchandise - Ending Merchandise Inventory.


Earnings per share (EPS) is the amount of earnings per each outstanding share of a company's stock.

Marginal Costing

Decision making approach in which marginal costs are used as the basis for choosing which product to make or which process to use. Also called incremental costing.

Fixed cost

A cost that does not vary depending on production or sales levels, such as rent, property tax, insurance, or interest expense.

Variable cost

A cost of labor, material or overhead that changes according to the change in the volume of production units. Combined with fixed costs, variable costs make up the total cost of production. While the total variable cost changes with increased production, the total fixed costs stays the same.

semi-variable Cost

Semi variable cost has both a fixed cost element (such as monthly rental for a phone line) and a variable cost element (call charges). It is also called as mixed cost.


Amount left over after direct (variable) costs are deducted from the sales revenue. Also called gross income, this sum pays for indirect (fixed) costs and contributes to net income.

key factor

Any factor concerned with production or sales which impose limit on the production or sales can be called limiting factor or key factor.

CVP analysis

Cost volume profit analysis is the analysis of three variables viz., cost,volume and profit. This analysis measures variations of costs and volume and their impact on profit.

Margin Of Safety

The percentage bywhich incoming revenue exceeds the total of expenses and liabilities. Tracking this percentage is useful for monitoring profitability, for determining when to cut costs, and for determining the ability of the company to adjust to negative unforeseen circumstances.

angle of Incidence

In graphic presentation of marginal cost data, i.e., a break even chart, the total cost line and sales line cross each other. The point of their crossing is termed break even point. The angle at which the sales line crosses the total cost line is called the angle of incidence.

Break Even Point

The price at which an option's cost is equal to the proceeds acquired by exercising the option. For a call option, it is the strike price plus the premium paid. For a put option, it is the strike price minus the premium paid.

plant merger decision

Two or more plants may be operating under the same management producing similar products.


An estimate of costs, revenues, and resources over a specified period, reflecting a reading of future financial conditions and goals.

budgetary control

Methodical control of an organization's operations through establishment of standards and targets regarding income and expenditure, and a continuous monitoring and adjustment of performance against them.

standard deviation
Measure of the variability (volatility) of a security, derived from the security's historical returns, and used in determining the range of possible future returns. The higher the standard deviation, the greater the potential for volatility.

flexible budget

Financial plan designed to vary in accordance with the actualneeds of a department or firm.

The amount of money or its equivalent received during a period of time in exchange for labor or services, from the sale of goods or property, or as profit from financial investments.

Payment of cash or cash-equivalent for goods or services, or a charge against available funds in settlement of anobligation as evidenced by an invoice, receipt, voucher, or other such document.


Profit is the excess of the revenues of a period over its related expenses during an accounting year. Profit increases the investment of the owners.

The excess of expenses of a period over its related revenues is termed as Loss.

The art of recording , classifying and summarizing , in a significant manner and in terms of money , transaction and events which are, in part at least, of financial character, and interpreting the result thereof.

Transaction is an event involving some value between two or more entities

Financial accounts are concerned with classifying, measuring and recording the transactions of a business. At the end of a period (typically a year), financial statements are prepared to show the performance and position of the business.


A method of accounting in which all costs incurred in carrying out an activity or accomplishing a purpose are collected, classified, and recorded. This data is then summarized and analyzed to arrive at a selling price, or to determine where savings are possible.

The process of preparing management reports andaccounts that provide accurate and timely financial and statistical information required by managers to make day-to-day and short-term decisions.

Something valuable that an entity owns, benefits from, or has use of, in generating income.

A claim against the assets, or legal obligations of a person or organization, arising out of past or current transactions or actions. Liabilities require mandatory transfer of assets, or provision of services, at specified dates or in determinable future.

Financial soundness of an entity that allows it to dischargeits monetary obligations as they fall due. It is measured bysolvency ratios.

The state or condition of yielding a financial profit or gain. It is often measured by price to earnings ratio.

The ability of an asset to be converted into cash quickly and without any price discount.

Assets that have the potential to increase in value and/or produce income.

A depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used

Assets having a physical existence, such as cash, equipment, and real estate; accounts receivable are also usually considered tangible assets for accounting purposes.


Something of value that cannot be physically touched, such as a brand, franchise, trademark, or patent.