Equity capital and debt capital

Working capital and fixed capital

Retained earnings and accounts receivable

Accounts payable and inventory

Equity financing

Debt financing

Venture capital financing

Capital budgeting

Dividends are tax-deductible, so shareholders demand extra compensation.

Equity investors are residual claimants who face the highest risk, and dividends paid to them receive no tax shield.

Equity investors are paid before creditors, so the company must offer them a premium.

Equity capital must be repaid at a fixed interest rate regardless of profits.

They are borrowings that must be repaid to a lender with interest.

They are the cumulative net income kept in the business after dividends are paid, and they cause no dilution of ownership.

They dilute the ownership percentage of existing shareholders.

They are expensive because interest must be paid on them each year.

A bank officer who evaluates a borrower's creditworthiness before approving a loan.

A supplier who extends credit to a company for goods delivered but not yet paid for.

A private equity investor who provides capital to high-growth-potential companies in exchange for an ownership stake.

An individual who buys government bonds expecting a fixed interest payment.

Accounts receivable is money the company owes suppliers; accounts payable is money customers owe the company.

Accounts receivable is money customers owe for goods or services delivered but not yet paid for; accounts payable is short-term debt owed to suppliers for goods or services received but not yet paid for.

Accounts receivable is a long-term loan from a bank; accounts payable is the value of unsold stock.

Both terms refer to cash the company holds in its bank account for daily operations.

The three main categories of inventory: raw materials, work-in-progress, and finished goods.

The three motives for holding cash: transactions, precautionary, and speculative.

The three types of fixed assets: tangible, intangible, and financial.

The three components of a balance sheet: assets, liabilities, and equity.

Transactions motive

Precautionary motive

Speculative motive

Profitability motive

The total value of assets a company owns minus its liabilities.

A lender's valuation of how likely a borrower is to repay a loan or debt, based largely on financial history and repayment behaviour.

The interest rate a company must pay when it issues new shares.

The amount by which a company's revenues exceed its expenses in a period.

A delivery truck used for distributing products

A company building used as a warehouse

Money raised by an entrepreneur to buy the equipment needed to make a product

An assembly line of tools and machinery in a factory

Money spent on day-to-day running costs such as utility bills and office rent

Money a company spends on fixed assets such as land, buildings, and equipment to produce goods and services

The cumulative profit kept in the business after dividends are paid

The difference between current assets and current liabilities

Raw materials consumed in production

Wages of assembly-line workers

Monthly office rent

Machinery used to make the product

A trademark is a tangible asset; a vehicle is an intangible asset.

Machinery is a tangible asset; a patent is an intangible asset.

Customer lists are tangible assets; buildings are intangible assets.

Tools are intangible assets; intellectual property is a tangible asset.

The decline in value of fixed assets over time due to wear and tear and obsolescence.

The increase in the market price of land and buildings over time.

The process of converting fixed assets into cash within one year.

The money set aside to pay interest on bonds issued by the company.

Tax accounting information, used to file the company's tax return.

Financial accounting information, used by external investors to assess the company.

Management accounting information, used internally for planning, controlling, decision-making and performance evaluation.

Bookkeeping information, used only to record daily transactions in date order.

Because it provides a single, standardized set of statements intended to satisfy the common needs of many external users rather than one specific group.

Because it is customized separately for each investor, bank and regulator who requests information.

Because it is used only by internal managers to plan budgets and control costs.

Because its only use is to calculate the company's tax liabilities.

The balance sheet reports assets, liabilities and equity at a specific point in time, while the income statement reports revenues, expenses and net profit or loss over a period of time.

The balance sheet tracks cash inflows and outflows from operating, investing and financing activities, while the income statement shows what the company owns and owes.

The balance sheet reports revenues and expenses over a period, while the income statement reports assets and liabilities at a point in time.

Both statements report the same information, only one is for internal users and the other for external users.

Each transaction is recorded once, mainly to track cash coming in and going out, like a personal checkbook register.

Every transaction is recorded in at least two different accounts as a debit and a credit.

Transactions are recorded only after all accounts have been closed at the end of the financial year.

It requires that every transaction be approved by both a creditor and an investor.

The journal is the book of original entry recorded in chronological order, and the ledger is the principal book where transactions are recorded and categorized.

The ledger is the book of original entry kept in date order, and the journal is where transactions are categorized by account.

The journal is the statement of cash inflows and outflows, and the ledger is the statement of profit or loss.

Both terms refer to the same book, used only to record tax payments.