what is an accounting equation?

What is an accounting equation?

The foundation for accounting; represents the relationship between assets, liabilities, and owners’ equity

The money received by resource owners and by producers for supplying goods and services to customers

What is income?

The money received by resource owners and by producers for supplying goods and services to customers

: Anything of value that a business or individual owns.

LIABILITIES: Debts, usually money, that the business owes.

True

False

NET INCOME/PROFIT/EARNINGS: Money remaining after operating expenses are subtracted from gross profit

True

False

ACCOUNTS PAYABLE:All monies owed to a firm by its customers

True

False

Accounting - The process of keeping and interpreting financial records.

True

False

Accounting system - The methods and procedures used in consistently handling the business's financial information.

True

False

Capital Investment Decisions - Decisions that determine which projects a business will invest in, how the investment(s) will be financed, and whether or not to pay dividends to shareholders.

True

False

Working Capital Management - Management of a firm’s current balance of assets and liabilities; involves accounts payable and receivable, inventory and cash.

True

False

What is finance?

The process of keeping and interpreting financial records.

The process of obtaining funds and using them to achieve the goals of the business

Cash Conversion Cycle of Working Capital Management - Ratio that refers to the number of days between a company’s paying for raw materials and receiving cash from selling the products made from those raw materials.

True

False

Return on Capital - A measure of how well a business generates cash flow in relation to the capital it has already invested in itself.

True

False

What is equity ?

Anything of value that a business or individual owns.

Assets minus liabilities; also known as stockholders’ (or shareholders’) equity, book value, and net worth.

What is assets?

Anything of value that a business or individual owns.

Debts, usually money, that the business owes.

Many firms have failed, not because of inefficiency of production, inability in marketing or non-availability of funds but due to the absence of competent finance manager.

True

False

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