Thursday, April 15, 2010

Financial terms defined - B -

Balance sheet. A means of summarizing a company's financial position—its assets, equity, and liabilities—at a specific point in time. According to the basic equation in a balance sheet, a company's assets equal its liabilities plus owner's equity. Balance sheet data is most helpful when compared with information from a previous year.

Banker's ratio. See current ratio.

Book value. The value at which an asset is carried on a balance sheet. The book value of equipment is reduced each year for depreciation. Therefore, the book value at any time is the cost minus accumulated depreciation.

Bottom-up budgeting. A process whereby managers put together budgets that they feel will best meet the needs and goals of their respective departments. These budgets are then "rolled up" to create an overall company budget, which is then adjusted, with requests for changes being sent back down to the individual departments.

Breakeven. The volume level at which the total contribution from a product line or investment equals total fixed costs. To calculate the breakeven volume, subtract the variable cost per unit from the selling price to determine the unit contribution, then divide the total fixed costs by the unit contribution.

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