10-K Report

The 10-K report contains more detailed information about a company's financials than the annual report and includes the three financial statements covered in this tutorial.

Accounts Receivable

Accounts receivable represents uncollected revenues the company expects to receive within one year. It is recorded as part of current assets on the balance sheet.

Accounts Payable

Accounts payable represents incurred expenses the company expects to pay within one year. It is recorded as part of current liabilities on the balance sheet.

Accrual Accounting System

Under this system, revenues are recorded when earned and expenses are recorded when incurred. Therefore, earned revenues may include sales on credit for which you have yet to receive cash and expenses may include bills that you have not yet paid. This method is used when preparing the income statement and balance sheet.

Annual Report

A report published yearly by all publicly-held companies that details the financial condition of the company and includes the balance sheet, income statement, cash flow statement, and other relevant information.

Assets

The value of everything a company uses to conduct business, such as cash, equipment, land, inventories, office equipment, and money owed to the company by customers and clients.

Balance Sheet

A financial statement that gives a snapshot of a company's financial situation at a particular point in time and lists its different assets, liabilities, and owners' equity.

Cash Basis of Accounting

A method of accounting where only actual cash inflows and cash outflows are recorded, i.e. when payment is received or made. This method is used when preparing the cash flow statement.

Cash Flow Statement

A financial statement that records a company's actual cash inflows and cash outflows over a defined period of time. It includes three sections: operating cash flow, investing cash flow, and financing cash flow.

Contributed Capital

Money invested in a company by its owners/shareholders. Reported as part of owners' equity on the balance sheet.

Cost of Goods Sold

Also known as Cost of Sales, this represents all the expenses directly related to the making and storing of a company's goods, such as raw materials, warehousing, and direct labor costs. Doesn't exist for service companies.

Cost of Sales

Also known as Cost of Goods Sold, this represents all the expenses directly related to the making and storing of a company's goods, such as raw materials, warehousing, and direct labor costs. Doesn't exist for service companies.

Current Assets

Assets the company plans to convert to cash, sell, or use during the coming year, including cash, accounts receivable, and inventory on hand.

Current Liabilities

The flip side of current assets, this is money the company expects to pay within one year and includes accounts payable and short-term borrowings.

Depreciation

A method used to account for the diminishing value of an asset over the time it is used and to match profit with the expenses it took to generate that profit. Registered as a non-cash expense.

Direct Method

A method of arriving at net operating cash flow by adjusting each item on the income statement from the accrual basis of accounting to the cash basis of accounting.

EBIT (Earnings Before Interest and Taxes)

Amount calculated by subtracting cost of goods sold and operating expenses from revenue on the income statement. Also called operating earnings.

EDGAR Database

A searchable database developed by the SEC that includes all documents and reports filed by U.S. publicly-traded companies since mid-1995.

Expenses

Different costs, such as cost of goods sold, operating expenses, and interest expense, incurred during the normal operation of a business.

Financing Cash Flow

Cash received or paid from borrowing money or paying back investors, creditors, and shareholders. The third part of calculating net cash flow on the cash flow statement.

Fixed Assets

Assets that the company does not plan to turn into cash within one year or that would take longer than one year to convert, including property, plants, machinery, and patents.

Gross Profit

An item included on the income statement of production companies, calculated by deducting cost of goods sold from revenues/sales generated from those goods. It is used as a rough estimate of the company's profitability.

Income Statement

A financial statement that specifies the financial results of a business over a defined period of time and lists the revenue, expenses, and net income of the business. Also referred to as the profit-and-loss statement, or P&L statement.

Income Tax

Tax levied by the government for income and part of the expenses deducted from revenues when arriving at net income on the income statement.

Indirect Method

A method of arriving at net operating cash flow by adjusting the net income on the income statement for non-cash revenues and expenses. Also called the reconciliation method.

Interest Expense

Represents all interest paid by the company for loans it incurred and is part of the expenses deducted from revenues in the process of arriving at net income on the income statement.

Investing Cash Flow

Cash used for investing in long-term assets, such as equipment or equity securities, and cash received from the sale of such investments. The second part of calculating net cash flow on the cash flow statement.

Investor Relations

The section on a company's website under which you can find the company's financial statements.

Liabilities

Debts a company owes to its creditors and lenders.

Long-Term Liabilities

The flip side of fixed assets, this represents money the company needs to pay back in one or more years. It includes long-term bank loans, mortgages, and bonds.

Net Loss

The bottom line of the income statement. The negative profit (loss) left after all expenses have been deducted from revenues. If expenses are smaller than revenues than we will refer to it as net profit.

Net Profit

The bottom line of the income statement. The profit left after all expenses have been deducted from revenues. If expenses are larger than revenues, then we refer to it as net loss.

Operating Cash Flow

The first section of the cash flow statement, which includes cash generated by and required for the daily operations of a business.

Operating Earnings

Earnings left after subtracting the cost of goods sold and operating expenses from a company's revenues on the income statement. Also called EBIT (Earnings Before Interest and Taxes).

Operating Expenses

All costs incurred in operating the business that are not directly related to the production and storage of a company's goods. They include administrative salaries, research and development expenses, rents, and marketing costs. These cost are included in the expense section of the income statement.

Owners’ Equity

Owners' equity equals all assets minus all liabilities and represents the part of the company owned by its shareholders. It generally includes contributed capital and retained earnings.

P&L Statement

A financial statement that specifies the financial results of a business over a defined period of time and lists the revenue, expenses, and net income of the business. Also referred to as the income statement or the profit-and-loss statement.

Profit-and-Loss Statement

A financial statement that specifies the financial results of a business over a defined period of time and lists the revenue, expenses, and net income of the business. Also referred to as the income statement or the P&L statement.

Profit Margin

An indicator of profitability. It is calculated by dividing the company's net income by its revenue for the same period. The higher the margin the more profitable a company is.

Retained Earnings

Money reinvested into the company after all dividends are paid. Reported as part of owners' equity on the balance sheet.

Revenues

Money generated by the company by selling its products or services to customers, before deducting any expenses. It includes only revenues associated with the company's main operations and is sometimes referred to as sales.

SEC

Securities and Exchange Commission, a U.S. governmental agency established by the Securities Exchange Act of 1934 to enforce all federal securities laws and protect investors from fraud in the securities markets.

Thomson Research

A database of historical SEC filings not included in EDGAR, as well as current filings and news for publicly-traded companies. Available to Baruch students through the Newman Library.