Define 'gross margin'.

Gross Margin = (Revenue - Cost of Goods Sold) / Revenue; indicates the percentage of revenue that exceeds the cost of goods sold.

Define 'capital budgeting'.

Capital budgeting is the process of making investment decisions in long-term assets and deciding which projects to invest in based on their potential financial returns.

Define 'accumulated depreciation' and its impact on asset valuation.

The total amount of depreciation expense that has been recorded against an asset since it was acquired, reducing the book value of the asset on the balance sheet.

Define 'break-even point'.

The level of production or sales at which total revenues equal total expenses, resulting in neither profit nor loss.

Define 'accounting cycle'.

The accounting cycle is a collective process of identifying, analyzing, and recording the accounting events of a company. It starts with a transaction and ends with closing the books.

Define 'capital budgeting' and its significance.

The process of planning and evaluating expenditures on assets whose cash flows are expected to extend beyond one year, crucial for making investment decisions that affect a company's strategic direction.

Define 'earnings per share (EPS)' and its calculation.

A financial metric that measures the amount of profit attributed to each share of stock. Calculated as net income minus dividends on preferred stock, divided by the average outstanding shares.

Define 'accrued expenses'.

Accrued expenses are expenses that have been incurred but not yet paid or recorded at the end of an accounting period.

Define 'deferred tax liability'.

Deferred tax liability arises when taxable income reported to tax authorities is less than pre-tax income reported on financial statements due to temporary differences.

Define 'current assets' on a balance sheet.

Current assets are assets that are expected to be converted into cash, sold, or consumed within one year or the operating cycle, whichever is longer.

Define 'accrual basis accounting'.

Accrual basis accounting records revenues and expenses when they are earned or incurred, regardless of when cash is exchanged.

Define 'consolidated financial statements'.

Financial statements that aggregate the financial position and results of operations of a parent company and its subsidiaries.

Define 'intangible assets' and give examples.

Non-physical assets that have value due to the rights or information they confer, such as patents, trademarks, copyrights, and goodwill.

Define 'financial leverage' and its impact on return.

The use of borrowed funds to finance the purchase of assets, with the potential to increase return on equity as long as the return on assets exceeds the cost of debt.

Define 'cash flow from investing activities'.

Cash flows from investing activities include transactions from the acquisition and disposal of long-term assets and other investments not included in cash equivalents.

Define 'comprehensive income'.

The change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, including all non-owner changes in equity.

Define 'financial leverage'.

Financial leverage refers to using borrowed funds to amplify potential returns on investment. It increases the potential for higher returns but also for higher losses.

Define 'current ratio'.

Current Ratio = Current Assets/Current Liabilities; measures liquidity by showing a firm's ability to cover short-term liabilities with short-term assets.

Define 'budgetary control' and its purpose.

The process of comparing actual financial outcomes with the budgeted figures to manage income and expenditure, and to implement cost control measures.

Define 'going concern' and its importance in financial reporting.

A going concern is an assumption that an entity will continue its operations in the foreseeable future and not liquidate or significantly curtail them.

Define 'intangible assets'.

Intangible assets are non-physical assets like patents, copyrights, trademarks, goodwill, and licensing agreements that have value due to rights and advantages they bring to a business.

Define 'forensic accounting'.

The use of accounting skills to investigate fraud or embezzlement and to analyze financial information for use in legal proceedings.

Define 'contribution margin'.

The amount by which sales revenue exceeds variable costs. It is used to cover fixed costs and to generate profit.

Define 'goodwill' in accounting.

Goodwill is an intangible asset that arises when a buyer acquires an existing business and pays more than the fair value of the identifiable net assets.

Define 'internal rate of return (IRR)' and its use.

The discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. Used to evaluate the attractiveness of a project or investment.