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Flashcards in Financial & Risk Management Deck (103)
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1

General ledger statements

Provides statements of firm's overall financial status so owners can make decisions crucial to firm's profitability

2

Project cost accounting

Tracks revenue, expenses, profits by individual projects

3

Current assets

Resources of a business that are converted into cash w/in 1 yr.

4

Fixed assets

Resources firm uses + maintains for long periods of time like equipment and property

5

Direct personnel expense

Expense of employee salaries plus cost of mandatory + discretionary expenses and benefits like payable taxes + health benefits

6

Gross revenue

All revenue generated by a business during a given period of time

7

Indirect labor

Labor not charged to a specific project or revenue producing account

8

Liabilities

Claims against the assets of a business

9

Net revenue

$ that remains from billing after deducting fees and expenses

10

Overhead

Expenses incurred to keep a business operating whether or not any revenue is being generated

11

What are 2 examples of overhead ?

1. Rent
2. Software licenses

12

What are 2 types of accounting methods?

1.cash accounting
2. Accrual accounting

13

Cash accounting

Income received and all salaries and expenses paid

Revenue + expenses are recognized at time the business receives the cash or pays the bill

14

Accrual accounting

Revenue + expenses are recognized at time they are earned or incurred whether or not cash changes hands

15

Modified accrual basis method

Records revenue earned and billed from fees and expenses including outside project consultant fees and expenses incurred. This means revenue is based only on invoiced fee and expense amounts sent and / or received

16

Advantages of cash accounting

1. Better at tracking actual cash flow
2. Simple
3. Best for small business /individual

17

Advantages of accrual accounting

Gives better idea of long term financial status

18

Balance sheet

Summarizes all assets and liabilities and shows financial position of a business - all assets must equally match liabilities

19

Net worth

Total assets minus the total liabilities

20

Owner equity

$ invested by owners/ stockholders

21

Profit and loss statement

Lists all income and expenses for certain periods of time

22

Project progress report

Shows hours and labor costs for each phase of the project and compares it to the estimated hours and cost

23

Office earnings report

Summarizes projects in terms of amount of revenue generated and expenses incurred , billed services etc

24

Aged accounts receivable

Status of all invoices for all projects whether or not they have been paid and "age' of each invoice

25

What is the average collection period for invoices?

60-75 days

26

What generates a chargeable ratio or utilization rate?

Time analysis report

27

Chargeable ratio

% Of time on direct labor / total time spent on indirect labs and direct labor, PTO. sick time, etc.

28

What % is the breakeven point for a chargeable ratio?

65%

29

List the 4 types of financial ratios

1. Current ratio
2. Net profit before tax
3. Overhead rate
4 quick ratio

30

Current ratio or solvency

Measure of a firm's ability to pay current debts

1.0 is the min. Acceptable
1.5 is healthy

Formula: total current assets ÷ total current liabilities