Accounting & Auditing

We do Business and Financial Consulting

Accounting

Is a method of gathering financial information and reporting on the activities of a business. The ultimate end product of accounting is NOT good financial reports. Rather, the desired end points of accounting are an excellent understanding of your business and better management action. Remember, accounting does not equal bookkeeping. Our Analysts fill the gap between bookkeeping and action.

Accounts Payable are amounts owed to suppliers or vendors.

Accounts Receivable are amounts that customers owe the company for services rendered.

Additional Paid-in Capital is the difference between the par value of the stock issued to owners and the total cash contributed in exchange for the issued stock.

ADRs (American Depository Receipts)

Are certificates issued by a U.S. depository bank, representing foreign shares held by the bank, usually by a branch or correspondent in the country of issue. One ADR may represent a portion of a foreign share, one share, or a bundle of shares of a foreign corporation. Because ADRs are quoted in U.S. dollars and traded just like any other stock, they make it simple for investors to diversify their holdings internationally for companies that are located outside the U.S. but traded on U.S. exchanges.

Amortization

Is an estimate for the amount by which an intangible asset category has decreased in value over a certain period of time.

Assets

Are resources that are owned by the firm which help earn profits. Many times, assets are buildings, machinery, inventory, or other resources a company owns or holds. Assets are listed on the Balance Sheet. Remember that assets are not always tangible - something material that can be physically held. For example, accounts receivable is an asset, but it is not something tangible.

Balance Sheet

Is a listing of assets, liabilities, and equity as of a certain date. The Balance Sheet is one of the two most important financial statements. The other important financial statement is the Income Statement.

Cash (Bank Funds)

Is the total funds available in a company's checking, savings, and marketable securities accounts that can be used to pay bills within 90 days.

Cash Flow Forecast

Is a month-by-month projection of all expected cash receipts and cash expenditures for a company. The difference between expected cash receipts and expected cash expenditures is referred to as Net Cash Flow. Managers prepare a cash flow forecast to anticipate cash balances in the future.

Cash Flow Statements

Are reports of the cash inflows and outflows for a particular period of time. In many instances, these cash flows are grouped into 3 categories: cash from operations, cash from investing activities, and cash from financing activities.

Common Stock represents ownership in a corporation and normally carries voting privileges.

Cost of Sales (COGS)

Is the direct cost of the products and services sold. The Cost of Sales section on the Income Statement may take on different formats. Typically, however, Cost of Sales (COGS) includes inventory costs, direct labor costs, material costs, sales commissions, and other costs directly associated with the generation of revenue.

Current Assets

Are assets a company has for a short period of time before they are put into the business, such as cash, accounts receivable, and inventory. Other current assets include marketable securities and prepaid expenses.

Current Liabilities

Are amounts owed that must be paid for in the short term, usually within a year. Accounts payable is an example of a common current liability. Current liabilities are considered accrued (built-up) expenses.

Current Ratio

Equals Total Current Assets divided by Total Current Liabilities. The current ratio indicates the amount of liquid assets available to pay off current liabilities or the company's ability to pay its bills and meet its current obligations. Generally, the higher the current ratio is, the greater the company's liquidity.

Debt (Liability)

Is an obligation to pay money that is due under specified terms. It is an amount owed as of a certain date.

Depreciation

Is a reasonable estimate of how assets lose value over time. Depreciation expense is the amount by which a company estimates an asset decreases in value for an Income Statement period in question.

Dividends Paid

Are distributions made to the company’s shareholders / owners.

EBITDA

Is Earnings before Interest, Taxes, Depreciation and Amortization.

Employees + Contractors (FTE)

Are the full-time staff and full-time contractors who do work. They are sometimes referred to as FTE (full-time equivalents). To calculate FTE of several part-time employees, take the total hours worked by the part-time employees and divide by the full-time equivalent hours.

Equity (Owner's Equity, Net Worth, Shareholders' Equity)

Is the recorded ownership claim of common and preferred shareholders in a corporation as reflected on the Balance Sheet. It is defined as Total Assets minus Total Liabilities.

Expenses

Are the costs of doing business and are measured over a certain period of time. Expenses show up on the Income Statement and are subtracted from Sales to determine Net Profit.

Extraordinary Gain or Loss

Is an economic event in a company that has a financial result which would not normally occur during the normal operating cycle of a business.

Financial Analysis

Is the act of evaluating a company's financial statements in order to understand the business better. The value offinancial analysis is to help managers understand how the business is doing AND how they might improve performance. It can also help investors better understand the financial performance of companies in which they might like to invest.

Fiscal Year

Is a twelve-month period during which the company reports income and expenses. Most companies use January 1 to December 31 as their fiscal year, however, companies may choose to select a twelve-month period other than the calendar year. Basically, it is important to note that fiscal year does not always mean calendar year.

Fixed Assets

Are any assets on the Balance Sheet considered to have a life or usefulness in excess of one year. Common examples include land, buildings, and machinery. It is best to enter gross fixed assets into the ProfitCents expert system. In other words, the Fixed Assets entry should not include any deductions for depreciation.

Fixed Costs

Are any costs or expenses that do not vary too much with changes in the volume of operations over a specified time. Rent expense is usually considered a fixed expense. However, no cost is fixed over the long term.

General & Administrative Expenses (G&A)

Are overhead costs such as rent, utilities, staff personnel, professional fees, and depreciation. G&A expenses are also referred to as “Operating Expenses”.

Gross Profit

Is the difference between Sales and Cost of Sales. It is the profit earned before paying operating expenses.

Gross Profit Margin

Equals Gross Profit divided by Sales, expressed as a percentage. It represents the cents of gross profit per sales dollar.

Income Statement

Shows a company's sales, expenses, and profits or losses for a certain period of time. The Income Statement is also referred to as a Profit & Loss Statement. The Income Statement and Balance Sheet are the two most important financial statements.

Intangible Assets

Are intellectual property or other "soft assets" that have a useful life but are not fixed assets.

Interest Expense

Is the cost of borrowed funds (debt). Companies must typically pay a premium for the use of another's money.

Inventory

Is the value of goods that have been produced or purchased for resale.

Net Income

Is the bottom line net earnings (or losses) of a company.

Net Operating Income

Is the operating income for a company; how much profit is made from operations. In our model, Net Operating Income equals Net Income + Depreciation + Amortization + Interest Expense + Income Taxes + Extraordinary Gains or Losses.