Hearing the words Stage 2 Accounting Studies 2009
Hearing the words: Stage 2 Accounting Studies
These are words you will hear your teacher use in relation to the topic
Assessing Performance. They are in Chapter 16 of your textbook.
comparison / A comparison between forecasts and results helps decision-making.weaknesses / Analysis of reports will show weaknesses in processes.
trends / Trends in sales are shown in final reports.
profitability / The on-going profitability of the business is assessed.
liquidity / Comparison of current assets and liabilities shows the liquidity of a business.
assets / Current assets include whatever is owned by the business.
capital / Capital is the owner’s investmant in the business.
ratios / Ratios are comparisons made with benchmarks.
benchmarks / Benchmarks are used to measure performance.
budget estimates / Budget estimates are predicted results of the business.
dynamic / A dynamic business will always seek to improve performance.
earning capacity / The earning capacity of the business is its capacity to make a profit.
financial stability / The financial stability ratio of a business is shown through the comparison of assets and liabilities.
commitments / Financial commitments are part of the liabilities of a business.
gearing / The gearing ratio shows how assets of a business are financed.
leverage / The leverage or gearing ratio is calculated by comparing liabilities with equity.
prudence / Undue prudence may mean that the position of a company is under-valued.
limitations / There are limitations to comparing businesses based on their financial reports.
consistency / Consistency must be ensured by using the same accounting procedures for each period.
historical cost / If fixed assets have been recorded at their original cost not their current values, this is called the historical cost concept.