Thursday, April 15, 2010

Financial terms defined - E , F and G -

Earnings per share (EPS). One of the most commonly watched indicators of a company's financial performance, it equals net income divided by the number of shares outstanding. When EPS falls, it usually takes the stock's price down with it.

Economic Value Added (EVA). The profit left over after a company has met the cost of capital—the expectations of those who provided of the capital.

Equity. The value of a company's assets minus its liabilities. On a balance sheet, equity is referred to as shareholders' equity or owner's equity.

Expenditure. An activity that results in an expense, or, the payment of cash for goods or services. This is a more specific term than "disbursement," which can include payments other than cash.

Financial leverage. A company's long-term debt in relation to its capital structure (the total of its common stock, preferred stock, long-term debt, and retained earnings). A company that has consistently high earnings can afford to be more leveraged, that is, it can afford to carry more long-term debt than a company whose earnings fluctuate significantly.

Financial statements. Reports of a company's financial performance. The three basic types of statement included in an annual report—the income statement, the balance sheet, and the cash flow statement—present related information, but provide different perspectives on a company's performance.

Fiscal Periods. An accounting time period (month, quarter, year), at the end of which the books are closed and profit or loss is determined.

Fixed vs. variable costs. Fixed costs remain constant despite sales volume; they include interest expense, rent, depreciation, and insurance expenses. Variable costs are incurred in relation to sales volume; examples include the cost of materials and sales commissions.

General ledger. A company's centralized and authoritative accounting record, where balance sheet, income, and expense information for the period in question is summarized.

Generally accepted accounting principles (GAAP). The rules and conventions that accountants follow in recording and summarizing transactions and preparing financial statements.

Gross margin. A ratio that measures the percentage of gross profit relative to sales revenue.

Gross profit. The sum left over after all direct product expenses or costs of goods sold have been subtracted from revenues.

Growth. An increase in the value of a company's revenues, profits, or the value of its equity.

Growth indicators. Measures that tell about a company's financial health. Common measures of growth include sales growth, profitability growth, and growth in earnings per share.

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