TMP 120 Lecture Notes - Lecture 7: Interest Expense, Gross Margin, Revenue Recognition
Document Summary
Accounting language: language of business, allows better question, risk assessment, and decision-making. What you have - what you owe = what you"re worth : assets (things that have value) - liabilities (what you owe/obligations)= worth. Shareholders" equity: reflect value of enterprise to its owners: revenue recognition: recording the sale (when it actually happened, accounting and operations are tied together. Income statement (profit and lost aka p & l ) What"s made & sold in the period minus what it costs to make. Minus selling & general expenses equals income for the period. Does not tell you when a firm receives cash or how much cash is on hand. Get cash in before you have to pay things going out: balance sheet. Snapshot of company financial health on one date. Reports what the company: has today (assets) = owes today (liabilities) + worth today (equity) Easy to see how working capital (liquidity) a company has (competitive advantage or risk: cash flow.
